Inflation persistence: euro area and new EU Member States

Arbeitspapier

Is inflation persistence in the new EU Member States (NMS) comparable to that in the euro area countries? We argue that persistence may not be as different between the two country groups as one might expect. We confirm that one should work carefully with the usual estimation methods when analyzing the NMS, given the scope of the convergence process they went through. We show that due to frequent breaks in inflation time series in the NMS, parametric statistical measures assuming a constant mean deliver substantially higher persistence estimates for the NMS than for the euro area countries. Employing time-varying mean leads to the reversal of this result and suggests similar or lower inflation persistence for the NMS compared to euro area countries. Structural measures show that backward-looking behavior may be more important component in explaining inflation dynamics in the NMS than in the euro area countries.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 810

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Bayesian Analysis: General ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Bayesian Analysis: General ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
• Subject: Classification-JEL: E31 ; Keywords: Inflation persistence ; New Hybrid Phillips curve ; new Member States ; time-varying mean ; Inflationsbekämpfung ; Preisrigidität ; New-Keynesian Phillips Curve ; EU-Staaten ; EU-Mitgliedschaft

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Franta, Michal ; Saxa, Branislav ; Šmídková, Katerina
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/153244
• Last update: 10.03.2025, 11:43 AM CET