This paper argues that the adoption of an inflation target reduces the persistence of inflation.
We develop the theoretical literature on inflation persistence by introducing a Taylor rule for
monetary policy into a model of persistence and showing that inflation targets reduce
inflation persistence. We investigate changes in the time series properties of inflation in
seven countries that introduced inflation targets in the late 1980s or early 1990s. We find that
the persistence of inflation is greatly reduced or eliminated following the introduction of
inflation targets
