Accessible Version
Has the Inflation Process Become More Persistent? Evidence from the Major Advanced Economies, Accessible Data
Fgiure 1. Inflation Persistence in Major Advanced Economies
Sum of coefficients on lagged inflation
| Country | Sample Limits | Coefficient | Upper Bound | Lower Bound |
|---|---|---|---|---|
| Canada | Sample including post-pandemic data | 0.709973752 | 0.790359937 | 0.790359937 |
| Canada | Pre-pandemic sample period | 0.418576211 | 0.553697661 | 0.553697661 |
| Euro area | Sample including post-pandemic data | 0.652992249 | 0.735839866 | 0.735839866 |
| Euro area | Pre-pandemic sample period | 0.441211641 | 0.579458266 | 0.579458266 |
| U.K. | Sample including post-pandemic data | 0.509918213 | 0.592233106 | 0.592233106 |
| U.K. | Pre-pandemic sample period | 0.370132953 | 0.485064283 | 0.485064283 |
| Japan | Sample including post-pandemic data | 0.480442852 | 0.622912601 | 0.622912601 |
| Japan | Pre-pandemic sample period | 0.349727571 | 0.480486572 | 0.480486572 |
| U.S. | Sample including post-pandemic data | 0.585654974 | 0.677996956 | 0.677996956 |
| U.S. | Pre-pandemic sample period | -0.106117107 | 0.095122389 | 0.095122389 |
Note: Pre-pandemic sample period is from 2000:Q1 to 2019:Q4, while sample including post-pandemic data is from 2004:Q1 to 2023:Q4. Key identifies in order from left to right.
Source: Haver Analytics; Authors' calculations.
Figure 2. Historical Decomposition of Euro-Area Inflation and Output
Left panel: Core prices
4-quarter percent change
| Date | Data | Initial conditions | Demand shock | Monetary shock | Supply shock |
|---|---|---|---|---|---|
| 2021-01-01 | 1.057793869 | 0.320297092 | 0.031936096 | 0.033750208 | 0.671810474 |
| 2021-04-01 | 0.884433395 | 0.207589784 | 0.165194566 | 0.019142309 | 0.492506736 |
| 2021-07-01 | 1.410171783 | 0.285409158 | 0.597622481 | 0.001671899 | 0.525468244 |
| 2021-10-01 | 2.40513821 | 0.570009185 | 0.914942437 | 0.031112605 | 0.889073984 |
| 2022-01-01 | 2.552679007 | 0.843285376 | 1.148521028 | 0.067214719 | 0.493657883 |
| 2022-04-01 | 3.618939972 | 1.064626185 | 1.363698384 | 0.217778904 | 0.972836499 |
| 2022-07-01 | 4.279421578 | 1.229253251 | 1.352497752 | 0.389794693 | 1.307875882 |
| 2022-10-01 | 4.939317867 | 1.343683313 | 1.522277606 | 0.54694495 | 1.526411997 |
| 2023-01-01 | 5.341346071 | 1.417519316 | 1.692195319 | 0.675120016 | 1.55651142 |
| 2023-04-01 | 5.349799932 | 1.46045788 | 1.745459382 | 0.748982402 | 1.394900269 |
| 2023-07-01 | 4.968604744 | 1.481132194 | 1.626716811 | 0.791693812 | 1.069061927 |
| 2023-10-01 | 3.653952242 | 1.486700876 | 1.218599712 | 0.751915542 | 0.196736113 |
| 2024-01-01 | 3.047404298 | 1.482786523 | 1.001652147 | 0.6646525 | -0.101686872 |
Right panel: Real GDP
4-quarter percent change
| Date | Data | Initial conditions | Demand shock | Monetary shock | Supply shock |
|---|---|---|---|---|---|
| 2021-01-01 | -0.186765774 | 0.882512502 | 0.10135045 | 0.134700639 | -1.305329366 |
| 2021-04-01 | 13.8691535 | 14.26011559 | 0.457816006 | -0.009907871 | -0.838870221 |
| 2021-07-01 | 4.530009919 | 4.116161072 | 1.53805364 | -0.06652074 | -1.057684053 |
| 2021-10-01 | 5.114101649 | 5.239063135 | 1.573576202 | 0.091628998 | -1.790166687 |
| 2022-01-01 | 5.306426241 | 4.683729789 | 1.406188943 | 0.171227518 | -0.954720009 |
| 2022-04-01 | 4.045322963 | 4.077484633 | 1.293539104 | 0.66544388 | -1.991144654 |
| 2022-07-01 | 2.448673872 | 3.479935788 | 0.506997301 | 0.93230335 | -2.470562567 |
| 2022-10-01 | 1.881622465 | 2.936255947 | 0.783081486 | 0.99119556 | -2.828910527 |
| 2023-01-01 | 1.308635625 | 2.471572251 | 0.802322518 | 0.901541571 | -2.866800716 |
| 2023-04-01 | 0.639889103 | 2.094846731 | 0.447138542 | 0.640223376 | -2.542319546 |
| 2023-07-01 | 0.117216165 | 1.803965721 | -0.217238695 | 0.39979303 | -1.869303891 |
| 2023-10-01 | 0.072573315 | 1.590179201 | -1.391532558 | -0.04525596 | -0.080817368 |
| 2024-01-01 | 0.355952634 | 1.44147376 | -1.243263043 | -0.418364832 | 0.576106749 |
Note: The red, green, and blue bars show the contributions of the post-2021 supply, monetary, and demand shocks, respectively. The grey bars show the contribution of initial conditions, reflecting shocks occurring before 2021:q1 and other long-run factors like trend growth (the model is estimated on demeaned GDP growth data).
Source: Authors' calculations
Figure 3. Implications of Higher Inflation Persistence for the Transmission of Supply Shocks in the Euro Area
Left panel: Core prices
4-quarter percent change
| Date | Data | Model forecast | Supply shock | Supply shock with higher inflation persistence |
|---|---|---|---|---|
| 2022-01-01 | 2.552679103 | 2.552679007 | 2.552679007 | 2.552679007 |
| 2022-04-01 | 3.618940032 | 3.618939972 | 3.618939972 | 3.618939972 |
| 2022-07-01 | 4.279421813 | 4.279421578 | 4.279421578 | 4.279421578 |
| 2022-10-01 | 4.939318049 | 4.939317867 | 4.939317867 | 4.939317867 |
| 2023-01-01 | 5.341346283 | 5.341346071 | 5.341346071 | 5.341346071 |
| 2023-04-01 | 5.349800104 | 5.349799932 | 5.349799932 | 5.349799932 |
| 2023-07-01 | 4.968604762 | 4.968604744 | 4.968604744 | 4.968604744 |
| 2023-10-01 | 3.653952235 | 3.653952242 | 3.653952242 | 3.653952242 |
| 2024-01-01 | 3.047404264 | 3.047404298 | 3.047404298 | 3.047404298 |
| 2024-04-01 | 2.689699758 | 2.799791971 | 2.799791971 | |
| 2024-07-01 | 2.507602792 | 2.733355745 | 2.863778862 | |
| 2024-10-01 | 2.88051761 | 3.201050853 | 3.546085719 | |
| 2025-01-01 | 2.802201743 | 3.19337104 | 3.781917413 | |
| 2025-04-01 | 2.617455556 | 2.948274169 | 3.76811852 | |
| 2025-07-01 | 2.427817232 | 2.676429072 | 3.560596208 | |
| 2025-10-01 | 2.261071723 | 2.436425106 | 3.253662876 | |
| 2026-01-01 | 2.122303654 | 2.24024571 | 2.913917128 | |
| 2026-04-01 | 2.009601474 | 2.085565872 | 2.585635549 | |
| 2026-07-01 | 1.919084693 | 1.965999353 | 2.295446442 | |
| 2026-10-01 | 1.846612146 | 1.874529844 | 2.056501992 | |
| 2027-01-01 | 1.788394048 | 1.804717566 | 1.872179468 |
Middle panel: Real GDP
4-quarter percent change
| Date | Data | Model forecast | Supply shock | Supply shock with higher inflation persistence |
|---|---|---|---|---|
| 2022-01-01 | 5.306426611 | 5.306426241 | 5.306426241 | 5.306426241 |
| 2022-04-01 | 4.045322936 | 4.045322963 | 4.045322963 | 4.045322963 |
| 2022-07-01 | 2.448673598 | 2.448673872 | 2.448673872 | 2.448673872 |
| 2022-10-01 | 1.881622051 | 1.881622465 | 1.881622465 | 1.881622465 |
| 2023-01-01 | 1.308635196 | 1.308635625 | 1.308635625 | 1.308635625 |
| 2023-04-01 | 0.639889 | 0.639889103 | 0.639889103 | 0.639889103 |
| 2023-07-01 | 0.117216343 | 0.117216165 | 0.117216165 | 0.117216165 |
| 2023-10-01 | 0.072573186 | 0.072573315 | 0.072573315 | 0.072573315 |
| 2024-01-01 | 0.35595312 | 0.355952634 | 0.355952634 | 0.355952634 |
| 2024-04-01 | 0.510198886 | 0.296289453 | 0.296289453 | |
| 2024-07-01 | 0.853401408 | 0.434111725 | 0.395890008 | |
| 2024-10-01 | 1.193638937 | 0.590319891 | 0.47723709 | |
| 2025-01-01 | 1.176006254 | 0.420278453 | 0.199470799 | |
| 2025-04-01 | 1.218790657 | 0.562907136 | 0.216192856 | |
| 2025-07-01 | 1.308417606 | 0.783421002 | 0.350936185 | |
| 2025-10-01 | 1.429744194 | 1.05089622 | 0.589487692 | |
| 2026-01-01 | 1.559068134 | 1.325951112 | 0.901205713 | |
| 2026-04-01 | 1.678286033 | 1.577326238 | 1.245747127 | |
| 2026-07-01 | 1.776768064 | 1.786700496 | 1.584061031 | |
| 2026-10-01 | 1.850022009 | 1.946657808 | 1.885177558 | |
| 2027-01-01 | 1.897822294 | 2.057395244 | 2.128761739 |
Right panel: Policy rate
Percent
| Date | Data | Model forecast | Supply shock | Supply shock with higher inflation persistence |
|---|---|---|---|---|
| 2022-01-01 | -0.5 | -0.499999918 | -0.499999918 | -0.499999918 |
| 2022-04-01 | -0.5 | -0.499999904 | -0.499999904 | -0.499999904 |
| 2022-07-01 | 0.75 | 0.750000038 | 0.750000038 | 0.750000038 |
| 2022-10-01 | 2 | 1.999999827 | 1.999999827 | 1.999999827 |
| 2023-01-01 | 3 | 3.000000075 | 3.000000075 | 3.000000075 |
| 2023-04-01 | 3.5 | 3.500000648 | 3.500000648 | 3.500000648 |
| 2023-07-01 | 4 | 3.999999779 | 3.999999779 | 3.999999779 |
| 2023-10-01 | 4 | 4.000000128 | 4.000000128 | 4.000000128 |
| 2024-01-01 | 4 | 3.999999967 | 3.999999967 | 3.999999967 |
| 2024-04-01 | 3.808479293 | 4.013887046 | 4.013887046 | |
| 2024-07-01 | 3.523601589 | 3.918979992 | 3.968196208 | |
| 2024-10-01 | 3.405862312 | 3.952759953 | 4.119808438 | |
| 2025-01-01 | 3.239127177 | 3.900147828 | 4.246254571 | |
| 2025-04-01 | 2.997714247 | 3.694836214 | 4.260294005 | |
| 2025-07-01 | 2.703450164 | 3.372802829 | 4.119697037 | |
| 2025-10-01 | 2.384292265 | 2.985488289 | 3.832160756 | |
| 2026-01-01 | 2.063265689 | 2.576363148 | 3.431452337 | |
| 2026-04-01 | 1.756490848 | 2.176428275 | 2.96119546 | |
| 2026-07-01 | 1.473867075 | 1.80523916 | 2.464504291 | |
| 2026-10-01 | 1.220411305 | 1.473313035 | 1.978013523 | |
| 2027-01-01 | 0.997611522 | 1.184608582 | 1.52910479 |
Source: Authors' calculations
Last Update:
July 19, 2024