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Fractional Integration and the Persistence of UK Inflation, 1210–2016
Author(s) -
Caporale Guglielmo Maria,
GilAlana Luis Alberiko
Publication year - 2020
Publication title -
economic papers: a journal of applied economics and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.245
H-Index - 19
eISSN - 1759-3441
pISSN - 0812-0439
DOI - 10.1111/1759-3441.12275
Subject(s) - persistence (discontinuity) , inflation (cosmology) , econometrics , economics , quarter (canadian coin) , sample (material) , mean reversion , degree (music) , perspective (graphical) , keynesian economics , mathematics , history , physics , geometry , geotechnical engineering , archaeology , theoretical physics , acoustics , thermodynamics , engineering
This note examines the degree of persistence of UK inflation by applying fractional integration methods to historical data spanning the period 1210–2016; the chosen approach is more general than the popular ARMA models based on the classical I(0) vs. I(1) dichotomy. The full‐sample results do not suggest that UK inflation is a persistent process; however, the recursive analysis indicates an increase in the degree of persistence in the 16th century and more recently after WWI and in the last quarter of the 20th century. On the whole, monetary and exchange rate regime changes do not appear to have had a significant impact on the stochastic behaviour of inflation if one takes a long‐run, historical perspective.