The rise and fall of U.S. inflation persistence

Meredith Beechey () and Pär Österholm

No 2007-26, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper estimates the path of inflation persistence in the United States over the last 50 years and draws implications about the evolution of the Federal Reserve's monetary-policy preferences. Standard models of central-bank optimization predict persistent inflation outcomes. Time variation of the central bank's preference for output stability should be reflected in changes in inflation persistence. We estimate an ARMA(1,q) model with a time-varying autoregressive parameter for monthly U.S. inflation data from 1955 to 2006. The coefficients provide an estimate of the inflation target and the path of inflation persistence. The estimated inflation target over the sample is approximately 2.8 percent and we find that inflation persistence declined substantially during Volcker and Greenspan's tenures to a level significantly less than one and significantly below that of the 1970s and early 1980s.

Keywords: Inflation (Finance); Monetary policy - United States (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-mon
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: The Rise and Fall of U.S. Inflation Persistence (2012)
Working Paper: The Rise and Fall of U.S. Inflation Persistence (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2007-26

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