12  See Hairault and Portier (1993) and Yun (1996). BIS Review 76/2008  3  inflation persistence that is typical of most of the post-WWII era. Several solutions have been proposed to introduce persistence in the model-implied time process for inflation, the best known being the idea that prices that are not reset optimally each period are somehow “indexed” to past inflation.
During recessions, the young, the less educated, and minorities are more likely to experience flat or declining wages, reduced hours, and unemployment.9 While this disparity is not a new phenomenon, dealing with a loss in labor income during the most recent recession was a heightened challenge to households that had mortgage obligations and no other forms of wealth to cushion the blow.