Wieland, Volker - Center for Financial Studies - 2008
(iii) perceived inflation persistence indicates a unit root in inflation, i.e. c0 = 1.
Given these initial conditions the ….4
Cumulative Output Gap Loss: - 6 xt
2 4 6 8 10 12 14 16 18 20
0
0.2
0.4
0.6
0.8
1
Perceived Inflation Persistence: ct
2 4 6 8 10 … perceived inflation persistence and backward-looking
indexation. The reason is simply that the disinflation is completed prior …