Mean Reversion of Inflation Rates: Evidence from 13 OECD Countries
Posted: 23 Oct 2001
The stationarity of inflation has several important economic implications. This paper applies two recently developed panel unit root tests to re-examine the stationarity of inflation rates in 13 OECD countries. We provide strong empirical evidence to support the mean reversion of inflation rates. Our finding fails to support the accelerationist hypothesis, and it also points out that the conventional cointegration approach in analyzing the Fisher effect and the convergence of inflation rates may not be appropriate.
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