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Non-linear Inflationary Dynamics: Evidence from the UK (2003)
| Citations: | 6 - 1 self |
BibTeX
@MISC{Arghyrou03non-linearinflationary,
author = {Michael Arghyrou and Christopher Martin and Costas Milas and We Thank Mike Clements and Jerry Coakley and Denise Osborn},
title = {Non-linear Inflationary Dynamics: Evidence from the UK},
year = {2003}
}
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Abstract
This paper estimates a variety of models of inflation using quarterly data for the UK between 1965 and 2001. We find strong evidence that the persistence of inflation is nonlinear and that inflation adjusted more rapidly in periods of macroeconomic stress such as the mid-1970s, the early 1980s and the late 1980s-early 1990s. Our results imply that inflation will respond more strongly and more rapidly to changes in interest rates when the price level is further away from the steady state level. This has implications for optimal monetary policy.
