A Note on the Dynamics of Persistence in US Inflation

Abstract

Empirical research on the degree and stability of inflation persistence in the US has produced mixed results: some suggest high and unchanged persistence during the last few decades, while others argue in favor of a decline in persistence since the early 1980s. We show that post-WWII US inflation (monthly and quarterly) became highly persistent during the´Great Inflation´ period, and then switched back to a low persistence process during 1984, and has remained stationary until the present day.Inflation, Multiple change in persistence, Stationarity, Great inflation.