Inflation inertia persists, challenging traditional economic models.
The study challenges the idea that inflation flexibility eliminates inflation inertia in the economy. By considering real variables as not fixed, the researchers found that inflation inertia can still exist in a balanced economic system. This means that even after temporary or permanent changes in money supply, inflation can persist and not fully adjust immediately. This finding suggests that inflation can have a lasting impact on the economy, even when external factors change.