Inflation persistence in Belgium

The article deals with inflation dynamics in Belgium, and in particular the degree of inflation persistence. It also presents a historical perspective in order to determine whether the statistical properties of the inflation process have changed over time. The analysis revealed significant changes in inflation dynamics over the past thirty years. First, inflation fell sharply in the mid 1980s, and this downward movement was common to all components of the national consumer price index, except services, where the decline in inflation was much more gradual. Next, the analysis showed that, under the current monetary policy regime, the degree of aggregate inflation persistence is relatively modest. The results also showed that the degree of persistence has diminished somewhat over time, presumably because of changes in the wage formation process. Finally, the study showed that the present findings are broadly similar to those recorded in the euro area, which suggests that the Eurosystem’s monetary policy is appropriate to the Belgian economy.