Has Euro-Area Inflation Persistence Changed Over Time?
By G. O’Reilly, Karl Whelan. Review of Economics and Statistics, 2005
254 citations recorded by the source corpus.
This paper analyzes the stability over time of the econometric process for euro-area inflation since 1970, focusing in particular on the behavior of the so-called persistence parameter (the sum of the coefficients on the lagged dependent variables). Perhaps surprisingly, in light of the Lucas critique, our principal finding is that there appears to be relatively little instability in the parameters of the euro-area inflation process. Full-sample estimates of the persistence parameter are generally close to 1, and we fail to reject the hypothesis that this parameter has been stable over time. We discuss how these results provide some indirect evidence against rational expectations models with strong forward-looking elements, such as the New Keynesian Phillips curve.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/b9694594fb54cadabb3fc07cf02b6dc2e271fee7
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In Economics and Econometrics
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Citations in the corpus
- Instability and Nonlinearity in the Euro-Area Phillips Curve (2012, unknown): “Following O’Reilly and Whelan (2005) and others, we interpret ρ as a measure of inflation persistence.”
- Using Mean Reversion as a Measure of Persistence (2005, background): “Burdekin and Siklos (1999), Bleaney (2001), Stock (2001), Willis (2003), Levin and Piger (2004), Pivetta and Reis (2007) and Cogley and Sargent (2001, 2007) for the U.”
- Measuring Inflation Persistence: A Structural Time Series Approach (2005, unknown): “First, O’Reilly and Whelan (2004) and Pivetta and Reis (2004) use rolling regressions to allow for shifts in the mean of inflation over different sub-samples.”
- Has the Inflation Process Changed (2006, background): “Debelle and Wilkinson (2002), Levin and Piger (2003) and O’Reilly and Whelan (2004) used rolling regressions to examine the evolution of the AR coefficient.”