One strand of this research has examined the persistence of inflation by allowing for potential changes in inflation regimes.11 The results show that the inflation process in Canada can be divided into three distinct regimes: one with extremely high persistence and high inflation rates, one with fairly low persistence and moderate inflation rates, and one with low persistence and low inflation rates.
In the first regime, which prevailed in the 1970s and early 1980s, when inflation moved up, it tended to stay up. Since that time, the economy has moved into the second and third regimes, with inflation becoming much less persistent.