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

Markus Jochmann

Research output: Working paperDiscussion 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 languageEnglish
Place of PublicationGlasgow
PublisherUniversity of Strathclyde
Pages1-24
Number of pages25
Volume10
Publication statusPublished - Jan 2010

Keywords

  • inflation dynamics
  • hierarchical dirichlet process
  • ihmm
  • structural breaks
  • bayesian nonparametrics

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