Persistence, Excess Volatility, and Volatility Clusters in Inflation (ICPSR 1251)

Version Date: Mar 8, 2002

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Principal Investigator(s):
Michael T. Owyang, Federal Reserve Bank of St. Louis

https://doi.org/10.3886/ICPSR01251.v1

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Summary

This paper presents a single, integrated model to explain the persistence and volatility characteristics of the United States inflation time series. Policymaker learning about a Markov-switching natural rate of unemployment in a neoclassical Phillips curve model with time-varying preferences produces inflation persistence, volatility clustering, and mean/variance correlation. The interaction between the policymaker's preferences and the Phillips curve generates the first and last results. Policymaker learning produces clusters of volatility as the monetary authority resets the learning algorithm whenever a shock to the Phillips curve occurs. Simulations using parameters estimated via Gibbs sampling confirms the theory.

Citation

Owyang, Michael T. Persistence, Excess Volatility, and Volatility Clusters in Inflation. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2002-03-08. https://doi.org/10.3886/ICPSR01251.v1

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Distributor(s)

Inter-university Consortium for Political and Social Research
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Data Collection Notes

  1. (1) The files submitted are a data file, 0111mod.txt, and a program file, 0111mop.prg. (2) These data are part of ICPSR's Publication-Related Archive and are distributed exactly as they arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigator if further information is desired.

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Original Release Date

2002-03-08

Version History

2018-02-15 The citation of this study may have changed due to the new version control system that has been implemented. The previous citation was:

  • Owyang, Michael T. Persistence, Excess Volatility, and Volatility Clusters in Inflation. ICPSR01251-v1. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2002-03-08. http://doi.org/10.3886/ICPSR01251.v1

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