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The Dynamics of Inflation Persistence in Chile

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  • Pablo Pincheira

Abstract

We show that some standard measures of inflation persistence in Chile have increased sharply in recent years. For the sample period between August 1998 and July 2008 we found that the half life of a shock to headline inflation is about 3 years. This is much higher that the half life of about 1 year computed in previous sample periods. When considering a measure of core inflation excluding food and energy our results are even stronger: for the sample period between August 2002 and July 2008 we found that the half life of a shock to this measure of core inflation is about 4 years and a half. This is much higher that the half life of less than a year computed in previous sample periods. This increase in inflation persistence is robust to changes in the univariate specification fitted to different inflation processes.

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  • Pablo Pincheira, 2008. "The Dynamics of Inflation Persistence in Chile," Working Papers Central Bank of Chile 505, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:505
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