 Inflation Dynamics and Monetary Policy (in Korean)Joon Myung Woo ()
No 2015-12, Working Papers from Economic Research Institute, Bank of Korea Abstract: Recent studies show that a monetary policy stance is an immediate determinant of inflation persistence. This paper shows how inflation persistence has changed over time and whether monetary policy stance plays an important role of determining inflation persistence. First, we estimate how inflation persistence has changed over time by using various models, including regime- switching ADF models and time-varying-parameter models. The results show that inflation for the period from the late 70s to the early 80s and during the foreign currency crisis in the late 90s has been relatively high with the persistence coefficient close to 1. In addition, the monetary policy stance represented by a Taylor-type policy rule has been more aggressive against inflation since 2000 when both inflation and its persistence were low and stable. Also, inflation persistence rather rises with macroeconomics instability under passive monetary policy. Therefore, the monetary policy stance on inflation appears to play an important role in lowering inflation persistence and achieving macroeconomic stability. Keywords: Inflation persistence; Monetary policy; Markov switching model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bok:wpaper:1512 Access Statistics for this paper More papers in Working Papers from Economic Research Institute, Bank of Korea Contact information at EDIRC. |
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