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Multiple Structural Breaks and Inflation Persistence: Evidence from C hina
Author(s) -
Li Tianfeng,
Wei June
Publication year - 2015
Publication title -
asian economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.345
H-Index - 28
eISSN - 1467-8381
pISSN - 1351-3958
DOI - 10.1111/asej.12044
Subject(s) - persistence (discontinuity) , economics , inflation (cosmology) , index (typography) , monetary economics , latin americans , structural break , macroeconomics , developing country , price index , econometrics , economic growth , physics , geotechnical engineering , world wide web , theoretical physics , computer science , engineering , linguistics , philosophy
The degree of inflation persistence fluctuates more in developing countries than in industrialized countries. This is because there are more economic reforms in developing countries than in industrialized countries. Hence, it is important to study the inflation persistence in developing countries. The present paper investigates the pattern of inflation persistence in C hina, a developing and transitional economy. Specifically, the paper studies statistically the number of structural breaks in C hina's inflation persistence based on the monthly retail price index ( MRPI ) and the quarterly retail price index ( QRPI ) inflation series from 1983 to 2011. The findings show that there are five and three structural breaks in the MRPI and QRPI inflation persistence, respectively. The present paper also exposes a high degree of persistence over the whole sample period and a slight decline in the level of the persistence since 1994. Furthermore, the persistence of two inflation series does not change monotonously but with obvious cyclical patterns. Using these derived estimated structural breakpoints, likely causes of the breakpoints in inflation persistence are investigated. Finally, theoretical and practical implications are discussed.