Forecasting inflation gap persistence: do financial sector professionals differ from non-financial sector ones?

The purpose of the present paper is to investigate forecasted inflation gap persistence using professionals’ survey-based data, differentiating between financial and non-financial sectors professionals. We derive the forecasted inflation gap persistence and using a state dependent model, we estimate the non-linear persistence coefficient of the inflation gap. We distinguish between the pre-Great Moderation, Great Moderation and Great Recession periods. Our main results indicate that whilst the estimates of persistence for GDP inflation largely confirm the results obtained using a linear model, for CPI inflation we find that there is strong evidence for state-dependence and time variation. By and large, the results are consistent with the price stability policy pursued in the Great Moderation period and perceived disinflationary pressures during the Great Recession period