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Measuring Inflation Persistence: A Structural Time Series Approach

Maarten Dossche () and Gerdie Everaert ()

No 459, Computing in Economics and Finance 2005 from Society for Computational Economics

Abstract: Time series estimates of inflation persistence incur an upward bias if shifts in the inflation target of the central bank remain unaccounted for. Using a structural time series approach we measure different sorts of inflation persistence allowing for an unobserved time-varying inflation target. Unobserved components are identified using Kalman filtering and smoothing techniques. Posterior densities of the model parameters and the unobserved components are obtained in a Bayesian framework based on importance sampling. We find that inflation persistence, expressed by the half-life of a shock, can range from 1 quarter in case of a cost-push shock to several years for a shock to long-run inflation expectations or the output gap

Keywords: Inflation persistence; Inflation target; Kalman filter (search for similar items in EconPapers)
JEL-codes: C11 C13 C22 (search for similar items in EconPapers)
Date: 2005-11-11
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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http://repec.org/sce2005/up.31340.1107814690.pdf (application/pdf)

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Working Paper: Measuring inflation persistence: a structural time series approach (2005) Downloads
Working Paper: Measuring inflation persistence: A structural time series approach (2005) Downloads
Working Paper: Measuring inflation persistence: a structural time series approach (2005) Downloads
Working Paper: Measuring inflation persistence: a structural time series approach (2005) Downloads
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