Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/127321 
Year of Publication: 
2010
Series/Report no.: 
Discussion Paper Series No. 504
Publisher: 
University of Heidelberg, Department of Economics, Heidelberg
Abstract: 
In a simple New Keynesian model, we derive a closed form solution for the inflation persistence parameter as a function of the policy weights in the central bank’s Taylor rule. By estimating the time-varying weights that the FED attaches to inflation and the output gap, we show that the empirically observed changes in U.S. inflation persistence during the period 1975 to 2010 can be well explained by changes in the conduct of monetary policy. Our findings are in line with Benati’s (2008) view that inflation persistence should not be considered a structural parameter in the sense of Lucas.
Subjects: 
inflation persistence
Great Moderation
monetary policy
New Keynesian model
Taylor rule
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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