Mean reversion and sales

Abstract

This article analyses the degree of inflation persistence in the EU15 using disaggregate HICP price indices. The results, based on a nonparametric measure proposed by Marques (2004) suggest a very moderate degree of median and mean inflation persistence. The modified treatment of sales in the Harmonised Index of Consumer Prices tends to reduce the measured degree of inflation persistence.

Acknowledgements

We would like to thank Ignacio Angeloni, Stephen Cecchetti, Pedro de Lima, Michael Ehrmann, Jordi Galí, Andrew Levin, Carlos Robalo Marques, other of the Eurosystem Inflation Persistence Network (IPN) and seminar participants at the Federal Reserve Bank of New York for their helpful comments and constructive criticism. The views expressed in this article are personal views of the authors and do not necessarily reflect those of the Banque centrale du Luxembourg or the Eurosystem.

Notes

¹ The official date may be 12 months later. However, the indices of the previous 12 months had been revised in order to avoid distortions in the inflation rates. For more details see ECB (2002).