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Persistence, Mean Reversion and Nonlinearities in Inflation Rates of Developed and Developing Countries Using Over One Century of Data
Author(s) -
GilAlana Luis Alberiko,
Gupta Rangan
Publication year - 2019
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/manc.12213
Subject(s) - mean reversion , economics , inflation (cosmology) , long memory , persistence (discontinuity) , monetary economics , unit root , econometrics , macroeconomics , keynesian economics , volatility (finance) , physics , geotechnical engineering , theoretical physics , engineering
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.