Does the dynamic time consistency model of inflation explain cross-country differences in inflations dynamics?

Dynamic time consistency models of monetary policy imply that the size of the inflationary response to price shocks and the persistence of inflation is inversely related to factors that enhance the central bank's ability to commit to low average inflation. Hence these models predict that the dynamics of inflation vary over time and across countries in response to changes in measures of political support for low inflation. We find support for this hypothesis in data from eighteen OECD countries over the period 1961-94. However, political variables account for only a small fraction of the variation in inflation dynamics across countries. (C) 2004 Elsevier Ltd. All rights reserved.