Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152929
Authors: 
Dossche, Maarten
Everaert, Gerdie
Year of Publication: 
2005
Series/Report no.: 
ECB Working Paper 495
Abstract: 
Time series estimates of inflation persistence incur an upward bias if shifts in the inflation target of the central bank remain unaccounted for. Using a structural time series approach we measure different sorts of inflation persistence allowing for an unobserved time-varying inflation target. Unobserved components are identified using Kalman filtering and smoothing techniques. Posterior densities of the model parameters and the unobserved components are obtained in a Bayesian framework based on importance sampling. We find that inflation persistence, expressed by the half-life of a shock, can range from 1 quarter in case of a cost-push shock to several years for a shock to long-run inflation expectations or the output gap.
Subjects: 
Bayesian Analysis
Inflation persistence
inflation target
Kalman filter
JEL: 
C11
C13
C22
C32
E31
Document Type: 
Working Paper

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