DP6834 Can the Facts of UK Inflation Persistence be Explained by Nominal Rigidity?

Author(s): David Meenagh , Patrick Minford , Eric Nowell , Prakriti Sofat , Naveen Srinivasan

Publication Date: May 2008

Keyword(s): Inflation Persistence , Monetary Regime Shifts , New Classical , New Keynesian , Nominal Rigidity

JEL(s): E31 , E37

Programme Areas: International Macroeconomics

Link to this Page: www.cepr.org/pubs/dps/DP6834.asp.asp

It has been widely argued that inflation persistence since WWII has been widespread and durable and that it can only be accounted for by models with a high degree of nominal rigidity. We examine UK post-war data where after confirming previous studies’ findings of varying persistence due to changing monetary regimes, we find that models with little nominal rigidity are best equipped to explain it.