Dynamics of Inflation Persistence in International Inflation Rates

Characteristics of inflation play a key role in policy formulation and market analysis. Several studies have analyzed inflation persistence and reached diverging conclusions. In this paper we investigate the dynamics of inflation persistence using fractionally integrated processes and find that there has been a clear decline in inflation persistence in the U.S. over the past two decades. We also show that the presence of fractional integration in inflation successfully explains previous diverging results. Lastly we provide some international comparisons to examine the extent to which there has been a commensurate decline in inflation persistence in the other G7 economies