Assessing Inflation Persistence: Micro Evidence on an Inflation Targeting Economy

Jan Babecký, Fabrizio Coricelli and Roman Horvath

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: The paper provides an empirical analysis of inflation persistence in an inflation targeting country, the Czech Republic, using 412 detailed product-level consumer price indexes underlying the consumer basket over the period from 1994:M1 to 2005:M12. Subject to various sensitivity tests, our results suggest that raw goods and non-durables, followed by services, display smaller inflation persistence than durables and processed goods. Inflation seems to be somewhat less persistent after the adoption of inflation targeting in 1998. There is also evidence for aggregation bias, that is, aggregate inflation is found to be more persistent than the underlying detailed components. Price dispersion, as a proxy for the degree of competition, is found to be negatively related to inflation persistence, suggesting that competition is not conducive to reducing persistence.

Keywords: Inflation dynamics; persistence; inflation targeting. (search for similar items in EconPapers)
JEL-codes: D40 E31 (search for similar items in EconPapers)
Date: 2008-06
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Assessing Inflation Persistence: Micro Evidence on an Inflation Targeting Economy (2009)
Working Paper: Assessing Inflation Persistence: Micro Evidence on an Inflation Targeting Economy (2009)
Working Paper: Assessing Inflation Persistence: Micro Evidence on an Inflation Targeting Economy (2009)
Working Paper: Assessing Inflation Persistence: Micro Evidence on an Inflation Targeting Economy (2009)
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