4 edition of Intrinsic inflation persistence found in the catalog.
Intrinsic inflation persistence
Kevin D. Sheedy
by Centre for Economic Performance, London School of Economics and Political Science in London
Written in English
It is often argued that the New Keynesian Phillips curve is at odds with the data because it cannot explain inflation persistence--the difficulty of returning inflation immediately to target after a shock without any loss of output. This paper explains how a model where newer prices are stickier than older prices is consistent with this phenomenon, even though it introduces no deviation from optimizing, forwards-looking price setting. The probability of adjusting new and old prices is estimated using a novel method that draws only on macroeconomic data, and the findings strongly support the premise of the model.
|Statement||Kevin D. Sheedy.|
|Series||CEP discussion paper -- no. 837|
|Contributions||London School of Economics and Political Science. Centre for Economic Performance.|
|The Physical Object|
|LC Control Number||2007619441|
Under nonzero trend inflation, the variable elasticity generates intrinsic persistence in inflation through a measure of price dispersion stemming from staggered price setting. It also introduces intrinsic persistence in wage inflation under staggered wage setting, which affects price inflation. inflation, and intrinsic inflation. The part most relevant to our work is changes in the central bank’s inflation objective. Dossche and Everaert find that inflation persistence is relatively low when the central bank is operating in a stable inflation environment and expected inflation is well anchored.
lower inflation persistence. 3 Methodological issues The most common approach used in empirical analysis of inflation persistence is based on the sum of autoregressive coefficients in a univariate process of inflation, following Andrews and Chen (): (1) where the sum of autoregressive coefficients is. 1 Steinsson () analyzes implications of inflation persistence for optimal monetary policy. 2 Studies concluding that a decline in inflation persistence occurred around the early s include Cogley and Sargent (), Stock and Watson (), and Cogley, Primiceri, and Sargent (). Some other studies, including Benati () and Pivetta and Reis (), find no such decline.
• Intrinsic inflation persistence low under the current regime • Well-anchored inflation expectations: source of “good” inflation persistence. • Hence, inflation persistence mostly extrinsic or driven by the persistence of determinants • The importance of extrinsic persistence suggests having . EFFECTS OF INFLATION ON ECONOMY Inflation is the increase in the price of general goods and service. Thus, food, commodities and other services become expensive for consumption. Inflation can cause both short-term and long-term damages to the economy; most importantly it causes slow down in the economy.
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We propose a novel theory of intrinsic inflation persistence by introducing trend Intrinsic inflation persistence book and variable elasticity of demand in a model with staggered price and wage setting.
Under nonzero trend inflation, the variable elasticity generates intrinsic persistence in inflation through a measure of price dispersion stemming from staggered price : Takushi Kurozumi, Willem Van Zandweghe.
Sheedy () showed that the intrinsic inflation persistence appears in an environment where newer prices are stickier than older ones. In his model, inflation persistence can arise even if the. ation persistence in general, and intrinsic persistence in particular, is surveyed byFuhrer().
2It has been argued that deviations from rational expectations (Roberts, Paloviita ) or adaptive learning (Milani,) could account for intrinsic in ation persistence. Furthermore, it might Intrinsic inflation persistence book the case that time-variation.
Downloadable. We propose a novel theory of intrinsic inflation persistence by introducing trend inflation and variable elasticity of demand in a model with staggered price and wage setting. Under nonzero trend inflation, the variable elasticity generates intrinsic persistence in inflation through a measure of price dispersion stemming from staggered price : Takushi Kurozumi, Willem Van Zandweghe.
The evidence on inflation persistence in general, and intrinsic persistence in particular, is surveyed by Fuhrer (forthcoming). 2 It has been argued that deviations from rational expectations (Roberts,Paloviita, ) or adaptive learning (Milani, ) could account for intrinsic inflation by: The sources of persistence are twofold.
First, the?driving process. for inflation?the output gap or, more commonly, real marginal cost?is itself quite persistent, and a casual inspection of the NKPC reveals that inflation must?inherit.
this persistence. Second, a modest amount of backward-looking or indexing behavior imparts some?intrinsic. The predominant source of inflation persistence in the NKPC is the lagged inflation term.
The amount of persistence imparted by the lag is quite sensitive to its size, with significant differences in persistence implied by an increase in the weight on past inflation from to As several papers have noted, the persistence of inflation.
Downloadable. This study estimates degree of intrinsic inflation persistence in Pakistan using aggregate price index, group level price indices, and individual commodity prices. We find no evidence of a unit root in (MoM) inflation at any level, except for house rent.
Using monthly data from to we find that the estimate of (overall) inflation persistence iswhich is low but. intrinsic persistence, then a model of inﬂation may require the equivalen t of the lags in equation above.
In this early literature, the theoretical justiﬁcation for including lags of in. (), the parameters encoding the ‘intrinsic’ component of inflation persistence are not invariant across monetary policy regimes, and under the more recent, stable regimes they are often estimated to be (close to) zero.
In line with Cogley and Sbordone (), I explore. persistence. The likely pivotal role of intrinsic persistence is of particular importance for Brazil given its long history of indexation, particularly before the start of the inflation targeting regime.
Some authors propose that intrinsic inflation persistence may not be structural in the. Woodford () provided a very helpful summary of the state of modeling intrinsic inflation persistence. An augmented Phillips curve specification that allows for the influence of lagged inflation takes the form (23) π t = μ π t-1 + (β-μ) E t π t + 1 + γ x t + ɛ t, with the rest of.
In order to see whether the intrinsic persistence in inflation has changed over the past few decades, I estimated this Phillips curve model over and over for different data samples. In each case, the sample ending point is held fixed at the most recent observation of the second quarter of The sample start date ranges from the first.
First, the “driving process” for inflation—the output gap or, more commonly, real marginal cost—is itself quite persistent, and a casual inspection of the NKPC reveals that inflation must “inherit” this persistence.
Second, a modest amount of backward‐looking or indexing behavior imparts some Cited by: Intrinsic and Inherited Inﬂation Persistence∗ Jeﬀrey C. Fuhrer Federal Reserve Bank of Boston In the conventional view of inﬂation, the New Keynesian Phillips curve (NKPC) captures most of the persistence in inﬂation.
The sources of persistence are twofold. First, the “driving process” for inﬂation is quite persistent, and the.
The sources of persistence are twofold. First, the "driving process" for inflation is quite persistent, and the NKPC implies that inflation must "inherit" this persistence. Second, backward-looking or indexing behavior imparts some "intrinsic" persistence to inflation. This paper shows that, in practice, inflation in the NKPC inherits very.
This study estimates degree of intrinsic inflation persistence in Pakistan using aggregate price index, group level price indices, and individual commodity prices. We find no evidence of a unit root in (MoM) inflation at any level, except for house rent. Using monthly data from to we find that the estimate of (overall) inflation persistence iswhich is low but significant.
Allowing for a break in intercept, the inflation measures generally exhibit relatively low inflation persistence. Evidently, high inflation persistence is not an inherent characteristic of industrial economies.
Keywords: Inflation dynamics, Bayesian econometrics, largest autoregressive root. Federal Reserve Bank of New York Staff Reports Inflation Persistence: Alternative Interpretations and Policy Implications Argia M.
Sbordone Staff Report no. May This paper presents preliminary findings and is being distributed to economists and other interested readers solely to stimulate discussion and elicit by: Inflation Persistence models, learning models, and so‐called “trend inflation models,” providing some new results intrinsic persistence, then a model of in ation may require the equivalent of the lags in equation above.
In this early literature, the theoretical justi cation for including lags of in. Books shelved as inflation: The Great Inflation and Its Aftermath: The Past and Future of American Affluence by Robert J. Samuelson, Understanding Inflat.If you need immediate assistance, call SSRNHelp ( ) in the United States, or +1 outside of the United States, AM to PM U.S.
Eastern, Monday - Friday.3 Inflation persistence in a generalised Taylor economy (GTE) 15 Generalised Taylor economy (GTE) 16 Calvo-GTE 17 18 4 Generalised Fischer economy (GFE) 18 Simple Fischer economy 19 Mankiw and Reis’s sticky information (SI) model 20 5 Hybrid Phillips curve models 21 Fuhrer and Moore’s () inflation persistence model