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Guglielmo Maria Caporale, Juan Infante, Luis Gil-Alana and Raquel Ayestaran
''Inflation persistence in Europe: the effects of the covid-19 pandemic and of the Russia-Ukraine war''
( 2023, Vol. 43 No.1 )
This note analyses the possible effects of the Covid-19 pandemic and of the Russia-Ukraine war on the degree of inflation persistence in both the euro zone and the European Union as a whole (EU27). For this purpose a fractional integration model is estimated, first for the full sample and then using recursive and rolling methods. Although the two latter methods provide evidence of a significant increase in inflation persistence (at least in the case of the EU27, for which in addition to jumps an upward trend is clearly identifiable), the full-sample results imply long-lasting but only temporary effects of the two shocks being examined. These findings suggest that the required policy response to both shocks should also have a temporary nature.
Keywords: Inflation persistence, fractional integration, recursive estimation, Covid-19 pandemic, Russia-Ukraine war
JEL: E3 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
C5 - Econometric Modeling: General
Manuscript Received : Oct 31 2022 Manuscript Accepted : Mar 30 2023

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