Modelling UK Inflation: Persistence, Seasonality and Monetary Policy
Denise Osborn () and
Marianne Sensier ()
Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The Univeristy of Manchester
This paper studies monthly RPIX inflation in the UK in the context of the change to inflation targeting in 1992. Our empirical models take account of the strong and changing seasonal pattern of inflation, while also focusing on inflation persistence and Phillips curve explanations. In both univariate and Phillips curve models, we find strong evidence of a change in parameters around the end of 1992, at the time of the introduction of inflation targeting. All models point to a substantial decline in inflation persistence after this date.
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