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Noncausality and Inflation Persistence

Markku Lanne

No 1286, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We use noncausal autoregressions to examine the persistence properties of quarterly U.S. consumer price inflation from 1970:1.2012:2. These nonlinear models capture the autocorrelation structure of the inflation series as accurately as their conventional causal counterparts, but they allow for persistence to depend on the size and sign of shocks to inflation as well as the inflation rate. Inflation persistence has decreased since the early 1980.s, after which persistence is also greater following small and negative shocks than large and positive ones. At high levels of inflation, shocks are absorbed more slowly before the early 1980.s and faster thereafter compared to low levels of inflation.

JEL-codes: C22 C51 E31 (search for similar items in EconPapers)
Pages: 27 p.
Date: 2013
New Economics Papers: this item is included in nep-ets and nep-mon
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Journal Article: Noncausality and inflation persistence (2015) Downloads
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