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INFLATION TARGETING AND THE STATIONARITY OF INFLATION: NEW RESULTS FROM AN ESTAR UNIT ROOT TEST
Author(s) -
Gregoriou Andros,
Kontonikas Alexandros
Publication year - 2006
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/j.0307-3378.2006.00246.x
Subject(s) - unit root , inflation (cosmology) , economics , unit root test , inflation targeting , econometrics , mean reversion , series (stratigraphy) , keynesian economics , macroeconomics , monetary policy , cointegration , biology , physics , theoretical physics , paleontology
In this paper, we examine the time series properties of inflation in seven countries that have adopted inflation targeting. Unlike previous studies, we utilize a non‐linear mean reverting adjustment mechanism for inflation and we discover that, although deviations of inflation from the target can exhibit a region of non‐stationary behaviour, overall they are stationary indicating successful targeting implementation.