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IS THERE AN ASYMMETRIC BEHAVIOUR IN AFRICAN INFLATION? A NON‐LINEAR APPROACH
Author(s) -
Mourelle Estefania,
Cuestas Juan Carlos,
Gilalana Luis Alberiko
Publication year - 2011
Publication title -
south african journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.502
H-Index - 31
eISSN - 1813-6982
pISSN - 0038-2280
DOI - 10.1111/j.1813-6982.2011.01266.x
Subject(s) - economics , inflation (cosmology) , unit root , persistence (discontinuity) , econometrics , shock (circulatory) , variable (mathematics) , monetary economics , mathematics , theoretical physics , medicine , engineering , mathematical analysis , physics , geotechnical engineering
Abstract In this paper we test the inflation persistence hypothesis as well as model the long‐run behaviour of inflation rates in a pool of African countries using a non‐linear framework. In order to do so, we rely on unit root tests applied to non‐linear models and fractional integration. The results show that the hypothesis of inflation persistence does not hold empirically for most of the countries. In addition, the estimated models (logistic smooth transition autoregressions) are stable in the sense that the variable tends to remain in the regime (low inflation or high inflation) once reached, and changes between regimes are only achieved after a shock. The results also indicate that the effects of the shocks on inflation tend to die out; exogenous factors, i.e. supply shocks and inertia may be causing this outcome, as they play a substantial role in the determination of the inflation rates for our selected African countries.