Publication detail

Measuring and Explaining Inflation Persistence: Disaggregate Evidence on the Czech Republic

Author(s): prof. Roman Horváth Ph.D., Ian Babetskii, Fabrizio Coricelli
Type: IES Working Papers
Year: 2007
Number: 22
Published in: IES Working Papers 2007/22
Publishing place: Prague
Keywords: inflation dynamics, persistence, inflation targeting
JEL codes: D40, E31
Suggested Citation: Babetskii, I., Coricelli, F., Horváth, R. (2007). “Measuring and Explaining Inflation Persistence: Disaggregate Evidence on the Czech Republic. ” IES Working Paper 22/2007. IES FSV. Charles University.
Abstract: The paper provides an empirical analysis of inflation persistence in the Czech Republic using 412 detailed product-level consumer price indexes underlying the consumer basket over the period from 1994:M1 to 2005:M12. Subject to various sensitivity tests, our results suggest that raw goods and non-durables, followed by services, display smaller inflation persistence than durables and processed goods. Inflation seems to be somewhat less persistent after the adoption of inflation targeting in 1998. There is also evidence for aggregation bias, that is, aggregate inflation is found to be more persistent than the underlying detailed components. Price dispersion, as a proxy for the degree of competition, is found to be negatively related to inflation persistence, suggesting that competition is not conducive to reducing persistence.
Downloadable: WP 2007_22 Horvath




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