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Examining the Time-Variation of Inflation Persistence in Ten Euro Area Countries

Nektarios Michail

No 2016-6, Working Papers from Central Bank of Cyprus

Abstract: Inflation persistence in ten Euro Area economies is examined, using a long series of monthly data. Full sample estimates find persistence to be close to unity and tests for structural breaks show that while these exist, they are rare. Rolling estimates of persistence, based on a mean reversion measure, suggest that even though persistence has been volatile, it has not reached values below 0.8. The findings lend support to the view that the introduction of the common currency has reduced inflation persistence in many countries. In contrast, the global financial crisis appears to have had a positive impact on persistence.

Keywords: inflation; persistence; euro area; mean reversion (search for similar items in EconPapers)
JEL-codes: C22 E31 E52 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2016-12
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