Inflation-Gap Persistence in the US

Timothy Cogley (tim.cogley@nyu.edu), Giorgio Primiceri and Thomas Sargent

American Economic Journal: Macroeconomics, 2010, vol. 2, issue 1, 43-69

Abstract: We estimate vector autoregressions with drifting coefficients and stochastic volatility to investigate whether US inflation persistence has changed. We focus on the inflation gap, defined as the difference between inflation and trend inflation, and we measure persistence in terms of short- to medium-term predictability. We present evidence that inflation-gap persistence increased during the Great Inflation and that it fell after the Volcker disinflation. We interpret these changes using a dynamic new Keynesian model that highlights the importance of changes in the central bank's inflation target. (JEL E12, E31, E52, E58)

JEL-codes: E12 E31 E52 E58 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/mac.2.1.43
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Citations: View citations in EconPapers (332)

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Working Paper: Inflation-Gap Persistence in the U.S (2008)
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