Ooft, G., Dulam, T. and Franses, P.H. (2026). Inflation persistence in the Caribbean Emerging Markets Review, 75.

Empirical evidence indicates that inflation persistence has declined in advanced economies due to better-anchored inflation expectations and enhanced monetary credibility. While several Latin American countries have experienced episodes of prolonged inflationary pressure, Caribbean economies have demonstrated comparatively lower average inflation rates over recent decades. This paper provides empirical evidence on the evolution of inflation persistence in selected Caribbean countries from 1971 to 2023 using two approaches. We employ logistic Smooth Transition Autoregressive models to evaluate intrinsic inflation persistence. In addition, we use Phillips-curve models to examine structural persistence, distinguishing between backward-looking and hybrid New-Keynesian specifications, with the latter controlling for expected inflation. Our findings document a significant reduction in intrinsic inflation persistence in several countries. For structural persistence, the backward-looking Phillips curve suggests declining persistence in 7 of 12 economies. However, once inflation expectations are incorporated, the backward-looking component largely loses its significance, and the apparent decline in persistence disappears for most countries. This suggests that the observed reduction in persistence may be primarily attributable to the role of expectations rather than lagged inflation. These results emphasize the role of central bank credibility and transparency in anchoring expectations, sustaining inflation stability in the Caribbean.