Type

Working Paper

Authors

Karl Whelan
Gerard O'Reilly

Subjects

Economics

Topics
euro area inflation persistence inflation finance mathematical models e31 e52 inflation finance europe phillips curve lucas critique

Has Euro-area inflation persistence changed over time? (2004)

Abstract This paper analyzes the stability over time of the econometric process for Euro-area inflation since 1970, focusing in particular on the behaviour of the so-called persistence parameter (the sum of the coefficients on the lagged dependent variables). Perhaps surprisingly, in light of the Lucas critique, our principal finding is that there appears to be relatively little instability in the parameters of the Euro-area inflation process. Full-sample estimates of the persistence parameter are generally close to one, and we fail to reject the hypothesis that this parameter has been stable over time. We discuss how these results provide some indirect evidence against rational expectations modelswith strong forward-looking elements, such as the New-Keynesian Phillips curve.
Collections Ireland -> University College Dublin -> School of Economics
Ireland -> University College Dublin -> College of Social Sciences and Law
Ireland -> University College Dublin -> Economics Research Collection

Full list of authors on original publication

Karl Whelan, Gerard O'Reilly

Experts in our system

1
Karl Whelan
University College Dublin
Total Publications: 69