| Inflation persistence is one of the important characteristics of inflation dynamics, Which is defined as the speed of inflation to revert slowly to its long-run equilibrium level after a shock, impacting directly on the cost of the central bank’s anti-inflation, thereby affecting achievement of monetary policy objectives. Therefore, to measure accurately the level of inflation persistence, reveal the dynamic changes, and analyze the influencing factors has important theoretical and practical significance for the formulation of monetary policy.Currently, foreign scholars have done largely theoretical and empirical reserches for inflation persistence, including consideration of a variety of friction inflation persistence introduced into the dynamic model of inflation, monetary policy mechanism converting impact on inflation persistence and the persistence of inflation under optimal monetary policy design and so on. However, domestic scholars mainly focused on measurement of China’s inflation persistence by the use of various methods and test whether inflation persistence significantly change. But measurement of inflation persistence are highly sensitive for statistical methods, there is a big difference result.This article measures China’s inflation persistence based on aggregate inflation, disaggregate inflation,as well as regional inflation data from multiple perspectives, while reveals its dynamic characteristics and analyzes its influencing factors, to provide a reliable evidence for decision-making of China’s monetary policy.First, inflation persistence refer to speed with which inflation convergence to long-run equilibrium level after a shock, which depends on the long-term equilibrium level settings. The mean of inflation reflected the equilibrium level for which inflation convergence after a shock in the context of the univariate time series representation of inflation, and therefore measurement of inflation persistence are closely related to the mean of inflation hypothesis. This article assumes that average inflation is time-varying, measures the degree of China’s inflation persistence based on a parametric and nonparametric reduced-form method, at the same time build a multivariate structural time series model to analyze the sources of China’s inflation persistence. Second, price-setting mechanisms for sectors is diffirent, so inflation persistence will be some differences. This article measures the degree of China’s disaggregate inflation persitence, by ARFIMA model and the impulse response function, while builds a dynamic factor model to explain differences of disaggregate inflation persistence. Third, not only the level of inflation persistene, but inflation persistence dynamics is also important for monetary policy design. This article analyse dynamic characteristics of China’s inflation persistence by constructing a time-varying autoregressive model, based on Kalman filtering method,and explains its reason of dynamic change. Fourthly, understanding inflation persistence resulting from diffirent shock is the key to control inflation. This article construcs a SVAR model based Chinese empirical data, and analyse the degree of inflation persistence affected by demand shocks, supply shocks, monetary shocks and external shocks by impulse response function and variance decomposition method.Through the research of China’s inflation persistence, this article gets the following conclusions:(1) China’s inflation persistence is high, and there are obvious structural break, inflation persistence exists a significant decline after structural break. In addition, the level of inflation persistence under the assumption of time-varying mean is significantly lower than the level of inflation persistence under the assumption of constant mean. These results show that lagged effects of China’s monetary policy is obvious, in order to achieve the objectives of monetary policy, monetary policy must be greater forward-looking. (2) slow adjustment of inflation expectations is the most important sources of high China’s inflation persistence, while persistent deviatiaon of the output gap can not be ignored. These results indicate that, as asymmetric information between the central bank and the public, the public can not accurately capture the shifts in the central bank inflation target, result in the slow adjustment of public expectations, which lead to inflation persistence. (3) China’s disaggregate CPI inflation exists fractionally integrated process, and disaggregate inflation persistence showes significant differences.Especially household equipment and service inflation is highest persistence, followed by clothing, housing and medical care personal products inflation, and the others is low. The main reason for this difference, clothing, housing and household equipment products and services inflation factor loading value in the common factor is large, however the other load factor value in the common factor is small. The above results suggest that the central bank formulates the inflation target, taking into account the differences in disaggregate inflation persistence, high persistence category gives greater weight, low persistence category given less weight. (4) China’s inflation persistence showes obvious dynamic characteristics, the specific behaviors: ①when inflation is high, inflation persistence is high; when inflation is low, inflation persistence is low;②inflation persistence is significantly decreased on anti-inflationary period. Given the dynamic changes of inflation persistence during different periods, the lag time of monetary policy is significantly different. Therefore when the central bank implement monetary policy, we must control the timing and intensity of monetary policy, so that timely and appropriate fine-tuning. (5) the degree which inflation persistence is affected after all kinds of shocks has significant differences, demand shocks is maximum, following monetary shock, and minimal impact of supply shocks and external shocks. These results indicate that China’s economy continued to grow rapidly and currency issued largely have a significant impact on inflation persistence. Thus the central bank inflation target should be given high weight, and promote stable economic growth on the basis of maintaining price stability.Given the current high level of inflation persistence, combining with their sources as well as the impact of the different shocks. The central bank to deal with inflation in the future must accurately grasp the lagged effects of monetary policy, strengthen the forward-looking monetary policy, as soon as possible for inflation to reflect, to reduce the cost of controlling inflation. This article suggests that when the central bank formulates monetary policy, should carefully select the timing of policies, prudently control the intensity of policies, and take full account of the public’s psychological expectations.
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