Inflation-Gap Persistence in the US
American Economic Journal: Macroeconomics
vol. 2,
no. 1, January 2010
(pp. 43-69)
Abstract
We estimate vector autoregressions with drifting coefficients and stochastic volatility to investigate whether US inflation persistence has changed. We focus on the inflation gap, defined as the difference between inflation and trend inflation, and we measure persistence in terms of short- to medium-term predictability. We present evidence that inflation-gap persistence increased during the Great Inflation and that it fell after the Volcker disinflation. We interpret these changes using a dynamic new Keynesian model that highlights the importance of changes in the central bank's inflation target. (JEL E12, E31, E52, E58)Citation
Cogley, Timothy, Giorgio E. Primiceri, and Thomas J. Sargent. 2010. "Inflation-Gap Persistence in the US." American Economic Journal: Macroeconomics, 2 (1): 43-69. DOI: 10.1257/mac.2.1.43Additional Materials
JEL Classification
- E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian
- E31 Price Level; Inflation; Deflation
- E52 Monetary Policy
- E58 Central Banks and Their Policies
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