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When Inflation Persistence Really Matters: Two examples

Tatiana Kirsanova, David Vines and Simon Wren-Lewis (simon.wren-lewis@economics.ox.ac.uk)

No 1351, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: In this paper we present two examples where the presence of inflation persistence could influence the qualitative nature of monetary policy. In the first case the desirability of a monetary policy regime comes under question when extensive inflation persistence exists. In the second case the direction in which interest rates move following a cost push shock changes when inflation persistence becomes important. In both cases, inflation persistence is central to the process influencing policy.

Keywords: Inflation Persistence; Macroeconomic Stabilisation (search for similar items in EconPapers)
JEL-codes: E52 E61 E63 (search for similar items in EconPapers)
Date: 2007
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