Inflation-gap persistence in the US

Timothy Cogley, Giorgio E. Primiceri, Thomas J. Sargent

    Research output: Contribution to journalArticlepeer-review


    We estimate vector autoregressions with drifting coefficients and stochastic volatility to investigate whether US inflation persistence has changed. We focus on the inflation gap, defined as the difference between inflation and trend inflation, and we measure persistence in terms of short- to medium-term predictability. We present evidence that inflation-gap persistence increased during the Great Inflation and that it fell after the Volcker disinflation. We interpret these changes using a dynamic new Keynesian model that highlights the importance of changes in the central bank's inflation target.

    Original languageEnglish (US)
    Pages (from-to)43-69
    Number of pages27
    JournalAmerican Economic Journal: Macroeconomics
    Issue number1
    StatePublished - Jan 1 2010

    ASJC Scopus subject areas

    • General Economics, Econometrics and Finance


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