TY  - JOUR
AU  - Cogley,Timothy
AU  - Primiceri,Giorgio E.
AU  - Sargent,Thomas J.
TI  - Inflation-Gap Persistence in the U.S.
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13749
PY  - 2008
Y2  - January 2008
UR  - http://www.nber.org/papers/w13749
L1  - http://www.nber.org/papers/w13749.pdf
N1  - Author contact info:
Timothy Cogley
Department of Economics
New York University
19 W. 4th St., 6FL
New York, NY 10012
E-Mail: tim.cogley@nyu.edu

Giorgio Primiceri
Department of Economics
Northwestern University
3218 Andersen Hall
2001 Sheridan Road
Evanston, IL 60208-2600
Tel: 847/491-5395
Fax: 847/491-7001
E-Mail: g-primiceri@northwestern.edu

Thomas J. Sargent
Department of Economics
New York University
19 W. 4th Street, 6th Floor
New York, NY  10012
Tel: 612/373-4383
Fax: 650/723-1687
E-Mail: thomas.sargent@nyu.edu
AB  - We use Bayesian methods to estimate two models of post WWII U.S. inflation rates with drifting stochastic volatility and drifting coefficients. One model is univariate, the other a multivariate autoregression. We define the inflation gap as the deviation of inflation from a pure random walk component of inflation and use both of our models to study changes over time in the persistence of the inflation gap measured in terms of short- to medium-term predicability. We present evidence that our measure of the inflation-gap persistence increased until Volcker brought mean inflation down in the early 1980s and that it then fell during the chairmanships of Volcker and Greenspan. Stronger evidence for movements in inflation gap persistence emerges from the VAR than from the univariate model. We interpret these changes in terms of a simple dynamic new Keynesian model that allows us to distinguish altered monetary policy rules and altered private sector parameters.
ER  -