This article analyses the behaviour of several price indexes over the whole life
of the Italian lira (1861-1998), and for various sub-periods defined by the
exchange-rate regimes of the Italian monetary history. We focus on the
persistence and stationarity properties of the inflation process and their
dependence on the real cycle. An international comparison with the United
States and the United Kingdom further supports the conclusion that Italian
inflation was abnormal as far as its mean value, degree of persistence and
relationship to the real cycle are concerned. In particular, we find that the
output-inflation relationship had a textbook-like, positive slope only during
periods of low inflation and low production volatility
