US Inflation Dynamics on Long Range Data

26 Pages Posted: 2 Jul 2015

See all articles by Vasilios Plakandaras

Vasilios Plakandaras

Democritus University of Thrace

Periklis Gogas

Democritus University of Thrace - Department of Economics

Rangan Gupta

University of Pretoria - Department of Economics

Theophilos Papadimitriou

Department of Economics, Democritus University of Thrace

Date Written: February 2, 2015

Abstract

In this paper we evaluate inflation persistence in the U.S. using long range monthly and annual data. The importance of inflation persistence is crucial to policy authorities and market participants, since the level of inflation persistence provides an indication on the susceptibility of the economy to exogenous shocks. Departing from classic econometric approaches found in the relevant literature, we evaluate inflation persistence through the nonparametric Hurst exponent within both a global and a rolling window framework. Moreover, we expand our analysis to detect the potential existence of chaos in the data generating process, in order to enhance the robustness of our conclusions. Overall, we find that inflation persistence is high from 1775 to 2013 for the annual dataset and from February 1876 to May 2014 in monthly frequency, respectively. Especially from the monthly dataset, the rolling window approach allows us to derive that inflation persistence has reached to historically high levels in the post Bretton Woods period and remained there ever since.

Keywords: Inflation, Persistence, Hurst exponent, Detrended Fluctuation Analysis, Lyapunov exponent

JEL Classification: E31, E60, C14

Suggested Citation

Plakandaras, Vasilios and Gogas, Periklis and Gupta, Rangan and Papadimitriou, Theophilos, US Inflation Dynamics on Long Range Data (February 2, 2015). Available at SSRN: https://ssrn.com/abstract=2625904 or http://dx.doi.org/10.2139/ssrn.2625904

Vasilios Plakandaras (Contact Author)

Democritus University of Thrace ( email )

University Campus
Komotini, 69100
Greece

Periklis Gogas

Democritus University of Thrace - Department of Economics ( email )

Komotini, 69100
Greece

HOME PAGE: http://www.econ.duth.gr/personel/dep/gkogkas/index.en.shtml

Rangan Gupta

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria, 0002
South Africa

Theophilos Papadimitriou

Department of Economics, Democritus University of Thrace ( email )

University Campus
Komotini, 69100
Greece

HOME PAGE: http://econ.duth.gr/author/papadimi/

Register to save articles to
your library

Register

Paper statistics

Downloads
18
Abstract Views
189
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information