Modeling U.S. Inflation Dynamics: A Bayesian Nonparametric Approach

Markus Jochmann

Modeling U.S. Inflation Dynamics: A Bayesian Nonparametric Approach

Markus Jochmann

Economics

Research output: Working paper › Discussion paper

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Abstract

This paper uses an infinite hidden Markov model (IHMM) to analyze U.S. inflation dynamics with a particular focus on the persistence of inflation. The IHMM is a Bayesian nonparametric approach to modeling structural breaks. It allows for an unknown number of breakpoints and is a flexible and attractive alternative to existing methods. We found a clear structural break during the recent financial crisis. Prior to that, inflation persistence was high and fairly constant.

Original language	English
Place of Publication	Glasgow
Publisher	University of Strathclyde
Number of pages	25
Publication status	Published - 31 Jan 2010

Publication series

Name	Strathclyde Discussion Papers in Economics
Publisher	University of Strathclyde
Volume	10-01

Keywords

inflation dynamics
hierarchical dirichlet process
ihmm
structural breaks
bayesian nonparametrics

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Cite this

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N2 - This paper uses an infinite hidden Markov model (IHMM) to analyze U.S. inflation dynamics with a particular focus on the persistence of inflation. The IHMM is a Bayesian nonparametric approach to modeling structural breaks. It allows for an unknown number of breakpoints and is a flexible and attractive alternative to existing methods. We found a clear structural break during the recent financial crisis. Prior to that, inflation persistence was high and fairly constant.

AB - This paper uses an infinite hidden Markov model (IHMM) to analyze U.S. inflation dynamics with a particular focus on the persistence of inflation. The IHMM is a Bayesian nonparametric approach to modeling structural breaks. It allows for an unknown number of breakpoints and is a flexible and attractive alternative to existing methods. We found a clear structural break during the recent financial crisis. Prior to that, inflation persistence was high and fairly constant.

KW - inflation dynamics

KW - hierarchical dirichlet process

KW - ihmm

KW - structural breaks

KW - bayesian nonparametrics

UR - https://www.strath.ac.uk/business/economics/research/discussionpapers/

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BT - Modeling U.S. Inflation Dynamics

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ER -

Modeling U.S. Inflation Dynamics: A Bayesian Nonparametric Approach

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