Abstract
The aim of the paper is to compare inflation persistence between the New Member States (NMS) that joined the European Union in years 2004 and 2007 and selected euro area members. If the inflation persistence in the two groups is different, NMS can encounter problems with the fulfillment of the Maastricht criterion on inflation and - after entering the euro area - with the inflation divergence.
We argue that due to the transition process experienced by the NMS in the last 15 years, measures of inflation persistence need to be selected carefully. Two measures are estimated.
The first one is based on the simple univariate statistical model of inflation with timevarying mean. The second one assumes inflation following fractionally integrated process and measures inflation persistence within an ARFIMA model.