Measuring inflation persistence under time-varying inflation target and stochastic volatility with jumps

Cássio Alves () and Márcio Laurini ()
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Cássio Alves: University of São Paulo
Márcio Laurini: University of São Paulo

Economics Bulletin, 2022, vol. 42, issue 2, 342 - 349

Abstract: We analyze whether the presence of a time-varying inflation target and stochastic volatility affect inflation persistence. We estimated different autoregressive specifications for inflation with and without time-varying parameters. The results show that the inflation persistence diminishes when we consider time-varying inflation target and stochastic volatility with jumps. We conclude that neglecting the time variation in inflation target and inflation volatility results in an upward biased estimation of persistence.

Keywords: Inflation persistence; Time-varying parameters; Stochastic volatility (search for similar items in EconPapers)
JEL-codes: C1 E3 (search for similar items in EconPapers)
Date: 2022-06-30
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