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UK INFLATION: PERSISTENCE, SEASONALITY AND MONETARY POLICY
Author(s) -
Osborn Denise R.,
Sensier Marianne
Publication year - 2009
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/j.1467-9485.2009.00471.x
Subject(s) - economics , inflation (cosmology) , univariate , persistence (discontinuity) , monetary policy , econometrics , phillips curve , keynesian economics , seasonality , inflation targeting , seasonal adjustment , monetary economics , macroeconomics , multivariate statistics , variable (mathematics) , statistics , mathematics , physics , geotechnical engineering , theoretical physics , engineering , mathematical analysis
In the light of the changes to UK monetary policy since the early 1980s, we study the existence and nature of changes in the properties of retail price inflation over this period. A feature of our analysis is the attention paid to the marked seasonal pattern of monthly UK inflation. After taking account of seasonality, both univariate and Phillips curve models provide strong evidence of changes in the level and persistence of inflation around the end of 1992, at the time of the introduction of inflation targeting. Indeed, all models point to the effective disappearance of inflation persistence after this date, implying that constant‐parameter models estimated using both pre‐ and post‐inflation targeting data periods should be treated with considerable caution.