Inflation persistence and flexible prices
By: Robert Dittmar, William T. Gavin, and Finn E. Kydland.
Contributors: Gavin, William T.; Kydland, Finn E.; Federal Reserve Bank of St. Louis.
Series: Working paper ;; 2001-010E; Working paper (Federal Reserve Bank of St. Louis : Online) ;; 2001-010E.
Publisher: Federal Reserve Bank of St. Louis
Published: 2001
Place of publication: [St. Louis, Mo.]
Language: eng
Format: Electronic resource
Subjects: Prices -- Econometric models.; Inflation (Finance) -- Econometric models.
Description: "If the central bank follows an interest rate rule, then inflation is likely to be persistence, even when prices are fully flexible.  Any shock, whether persistent or not, may lead to inflation persistence.  In equilibrium, the dynamics of inflation are determined by the evolution of the spread between the real interest rate and the central bank's target.  Inflation persistence in U.S. data can be characterized by a vector autocorrelation function relating inflation and deviations of output from trend.  This paper shows that a flexible-price general equilibrium business cycle model with money and a central bank using an interest rate target can account for such inflation persistence"--Federal Reserve Bank of St. Louis web site.
Notes: Includes bibliographical references.
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Mode of access: World Wide Web.