Are the Facts of UK Inflation Persistence to Be Explained by Nominal Rigidity or Changes in Monetary Regime?
WEF Working Paper No. 0028
37 Pages Posted: 2 Nov 2007
Date Written: July 2007
It has been widely argued that inflation persistence since WWII has been widespread and durable and that it can only be accounted for by models with a high degree of nominal rigidity. We examine UK post-war data and find that the varying persistence it reveals is largely due to changing monetary regimes and that models with moderate or even no nominal rigidity are best equipped to explain it.
Keywords: inlfation persistence, New Keynesian, New Classical, nominal rigidity, monetary regime shifts
JEL Classification: E31, E37
Suggested Citation: Suggested Citation