Time-varying persistence of inflation: evidence from a wavelet-based approach

Boubaker, Heni; Canarella, Giorgio; Gupta, Rangan; Miller, Stephen M.

doi:10.1515/snde-2016-0130

Cited by 8 publications

(13 citation statements)

References 106 publications

(95 reference statements)

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“…Hence, an accurate estimate of inflation persistence will help us understand to what extent these macroeconomic models are consistent with the empirical evidence (Antonakakis et al ., ). The degree of inflation persistence determines the extent to which central banks can control inflation, as it measures the speed at which the inflation rate returns to its equilibrium level after an inflationary shock (Boubaker et al ., ). Thus, speaking statistically, it is important to determine whether inflation is a random walk (i.e.…”

Section: Introductionmentioning

confidence: 97%

Persistence, Mean Reversion and Nonlinearities in Inflation Rates of Developed and Developing Countries Using Over One Century of Data

Gil-Alana

Gupta

2018

The Manchester School

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This study examines inflation over one century of data for 29 countries based on fractional integration incorporating nonlinearities to account for structural breaks and asymmetry in the process of inflation. The results suggest that the degree of persistence is that, while there is evidence of long-memory behavior in the inflation rates of 17 countries, barring Russia, none of the remaining 28 countries indicate evidence of unit roots. The result implies that monetary authorities in these countries can play a role in controlling inflation, though the extent of intervention required will tend to vary, with the strongest being in Russia.

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Section: Introductionmentioning

confidence: 97%

Persistence, Mean Reversion and Nonlinearities in Inflation Rates of Developed and Developing Countries Using Over One Century of Data

Gil-Alana

Gupta

2018

The Manchester School

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“…Researchers document significant evidence of long memory in the inflation processes of many countries over the last twenty years of empirical research. For example, see Delgado and Robinson (1994), Hassler and Wolters (1995), Baillie (1996), Baillie et al (1996), Baum et al (1999), Bos et al (1999Bos et al ( , 2002, Gadea and Mayoral (2005), Kumar and Okimoto (2007) Beechey and Osterholm (2009), Meller and Nautz (2012), Kouretas and Wohar (2012), Miller (2016, 2017), and Boubaker et al (2017), among many others.…”

Section: Introductionmentioning

confidence: 99%

Long-memory modeling and forecasting: evidence from the U.S. historical series of inflation

Boubaker¹,

Canarella

Gupta

et al. 2020

Studies in Nonlinear Dynamics &Amp; Econometrics

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We report the results of applying several long-memory models to the historical monthly U.S. inflation rate series and analyze their out-of-sample forecasting performance over different horizons. We find that the time-varying approach to estimating inflation persistence outperforms the models that assume a constant long-memory process. In addition, we examine the link between inflation persistence and exchange rate regimes. Our results support the hypothesis that floating exchange rates associate with increased inflation persistence. This finding, however, is less pronounced during the era of the Great Moderation and the Federal Reserve System’s commitment to inflation targeting.

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“…A well-known measure of persistence is the fractional integration parameter at frequency zero, and different degrees of persistence, stationarity, and mean-reversion occur depending on the value of the fractional integration parameter (see, e.g., Gil-Alana, 2005a;Gadea and Mayoral, 2006; Kumar and Okimoto, 2007;Boubaker et al, 2017;Canarella and Miller, 2016, 2017a, 2017b). 1 In policy terms, the importance of persistence in prices and inflation stems from the economy's susceptibility to crisis and contagions as well as the possibility that exogenous shocks can produce permanent effects.…”

Section: Introductionmentioning

confidence: 99%

Modeling US historical time-series prices and inflation using alternative long-memory approaches

et al. 2018

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We consider two important features of the historical U.S. price data (1774-2015), namely the data's persistence and cyclical structure. We first consider the persistence of the series, and focus on standard long-memory models that incorporate a peak at the zero frequency. We examine different models with respect to the deterministic terms, including non-linear deterministic trends of the Chebyshev form. Then, we investigate a more general model that includes both persistence and cyclicality of the series and, thus, includes two fractional integration parameters, one at the zero (long-run) frequency and the other at the non-zero (cyclical) frequency. We model the cyclical structure as a Gegenbauer process. This specification outperforms the standard long-memory specifications. We find that the order of integration at the zero frequency is about 0.5, and the one at the cyclical frequency is about 0.2 with cycles repeating approximately every 6 years, producing mean-reverting long-memory effects at both the zero and cyclical frequencies. Fitting the values to this model, however, we discover the presence of a break that, according to the methods employed, takes place at around 1940-41. The results indicate the prevalence of the long run or zero component with a much higher degree of persistence during the second post 1940-41 subsample, suggesting important implications for monetary policy.

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Time-varying persistence of inflation: evidence from a wavelet-based approach

Cited by 8 publications

References 106 publications

Persistence, Mean Reversion and Nonlinearities in Inflation Rates of Developed and Developing Countries Using Over One Century of Data

Persistence, Mean Reversion and Nonlinearities in Inflation Rates of Developed and Developing Countries Using Over One Century of Data

Long-memory modeling and forecasting: evidence from the U.S. historical series of inflation

Modeling US historical time-series prices and inflation using alternative long-memory approaches

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