Is there a unit root in inflation?

Henry, Ólan T.; Shields, Kalvinder

doi:10.1016/j.jmacro.2003.03.003

Cited by 44 publications

(33 citation statements)

References 37 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Andreou and Spanos (2003), Culver and Papell (1997), Henry and Shields (2004), Lee and Wu (2001), Nelson and Plosser (1982), Ng and Perron (2001), Perron (1989), Perron (1997), Rudebusch (1992) and Zivot and Andrews (1992). They are representative of the empirical literature related to this research, recently published or frequently cited, and published in prestigious professional journals.…”

Section: Methods Of Time Series Analysismentioning

confidence: 99%

“…The ARMA form is preferred, because: (1) it allows a more parsimonious representation than the pure AR form for many time series that occur in practice, and it should never yield a less parsimonious form, and (2) over-differencing implies the presence of non-invertible MA(1) factors, so that the use of MA forms, together with AR, helps one detect over-differencing. All papers cited in the second paragraph of this section ignore MA structure, except Culver and Papell (1997) and Henry and Shields (2004). This is surprising, given that one of the main reasons for using MA(1) structure is that it helps clarify the order of integration, the central objective of all of these papers.…”

Section: Representationmentioning

confidence: 99%

“…In the papers cited at the beginning of this section, graphical materials are almost completely ignored. Only Zivot and Andrews (1992) and Henry and Shields (2004) include data graphs of all series they analyze, and Zivot and Andrews (1992) only present data graphs of the levels of the series. It is surprising that, with the exception of Henry and Shields (2004), in none of the studies cited are data graphs and acf/pacf of both levels and first differences presented, when the studies themselves are intended to evaluate whether the series follow ( ) Melard (1984) with other procedures developed by Mauricio (1992Mauricio ( , 1995.…”

Section: Model-buildingmentioning

confidence: 99%

“…Only Zivot and Andrews (1992) and Henry and Shields (2004) include data graphs of all series they analyze, and Zivot and Andrews (1992) only present data graphs of the levels of the series. It is surprising that, with the exception of Henry and Shields (2004), in none of the studies cited are data graphs and acf/pacf of both levels and first differences presented, when the studies themselves are intended to evaluate whether the series follow ( ) Melard (1984) with other procedures developed by Mauricio (1992Mauricio ( , 1995. This criterion is to be preferred to the conditional maximum likelihood criterion, especially when sample size is small, because: (1) the conditional criterion is but an approximation to the unconditional criterion and (2) that the model might be improved in a certain direction, then one tries the reformulation.…”

Section: Model-buildingmentioning

confidence: 99%

“…Gross National Product (GNP) deflator for 2/62-2/97, but they make no claim to relevance for their empirical results. Henry and Shields (2004) treat quarterly CPI data for 1/60-4/01. This paper is mainly interested in the possible non-linearity of the processes underlying the data, but does not find non-linearity for the U.S.: it concludes that U.S. inflation follows an ( )…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Properties of Two U.S. Inflation Measures (1985-2005)

Martínez¹

2009

SSRN Journal

View full text Add to dashboard Cite

Analyses are presented of 84 quarterly observations 1/85-4/05 on two U.S. index numbers of nominal prices often employed to measure inflation. Analyses are designed to answer two key questions of interest to macroeconomists. Is inflation stationary (I(0)) or stochastically non-stationary (I(1))? If it is I(1), is it scalar or multivariate? Both measures of inflation are found clearly to be I(1) and, for these measures, inflation is found clearly to be scalar. The paper also illustrates univariate analysis procedures (and report standards) considered to be more effective and convincing than those found in the existing literature on inflation measures.

show abstract

Section: Methods Of Time Series Analysismentioning

confidence: 99%

Section: Representationmentioning

confidence: 99%

Section: Model-buildingmentioning

confidence: 99%

Section: Model-buildingmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Properties of Two U.S. Inflation Measures (1985-2005)

Martínez¹

2009

SSRN Journal

View full text Add to dashboard Cite

show abstract

Testing unit roots, structural breaks and linearity in the inflation rates of the G7 countries with fractional dependence techniques

Gil-Alana

Yaya

Solademi

2016

Appl Stoch Models Bus & Ind

View full text Add to dashboard Cite

In this paper, we have examined the inflation rates in the Group of Seven countries, investigating issues such as the existence of unit roots, structural breaks, fractional integration and potential non-linearities using a fractional dependence (FD) approach based on Chebyshev polynomials in time. This robust FD approach allows one to test for persistence as well as non-linearity of the series. We first tested for stationarity and structural breaks using classical approaches and observed inconclusive results with regard to the stationarity levels of the series. Using Bai-Perron tests, we actually confirmed significant structural breaks, even up to five, in each of the inflation series. However, noting that structural breaks are significantly related to fractional differentiation, this latter approach was also conducted. Here, we observed that the estimates of the differencing parameter were quite stable across time, and evidence of unit roots was found in the cases of the UK, Canada, France, Japan and the USA; for Germany, we found some evidence of mean reversion, while estimates of d above 1 were found in the case of Italy. On the other hand, non-linear deterministic trends were clearly rejected in all cases. ‡ Asymmetry is a property explaining unequal movements of asset prices (stocks, inflation, oil prices, exchange rates, etc.) between equilibrium state to 'up' market and 'down' market to equilibrium state. There are quite a number of papers on linear unit root testing inflation rates. Starting with Lai [3] who applied the modified Dickey-Fuller (DF) unit root test of Park and Fuller [4], testing nonstationarity in the inflation rates of the Group of Seven (G7) countries, he concluded that inflation rates were stationary. Cook [5] also found stationarity for the US inflation rates when he applied the DF [6, 7] test. Charemza et al. [8] considered inflation rates for a selected group of 93 countries, applying the augmented DF (ADF, [6,7]) tests, and found nonstationarity of the inflation series. Because of the different sample sizes considered in the aforementioned papers, the authors have obtained contradictory results.Structural breaks may affect the stationarity level of the time series [9]. § Zivot and Andrews [10] proposed a unit root test that selects the breakpoint endogenously from the data. This test has been extended to include the case of two break points in both the level and the trend series [11]. Multiple structural breaks tests have been proposed in Bai and Perron [12,13]. Caporale and Paxton [14] investigated stationarity of the inflation rates for five Latin American countries using the ADF unit root test and the unit root test with multiple structural breaks of Bai and Perron [12,13]. These authors found stationarity for three countries with the ADF tests, whereas the unit root test with structural breaks pointed to stationarity for all five inflation series.Some studies have thought of inflation as a dynamic non-linear process, and in this case, non-linear approaches have been conducte...

show abstract