Time-Varying Persistence of Inflation: Evidence from a Wavelet-Based Approach

Studies in Nonlinear Dynamics and Econometrics, September 2017

38 Pages Posted: 20 Aug 2016 Last revised: 26 Nov 2017

See all articles by Heni Boubaker

Heni Boubaker

IPAG Business School

Giorgio Canarella

California State University, Los Angeles - Department of Economics & Statistics; University of Nevada, Las Vegas

Rangan Gupta

University of Pretoria - Department of Economics

Stephen M. Miller

University of Nevada, Las Vegas - Department of Economics; University of Connecticut - Department of Economics

Date Written: August 19, 2016

Abstract

We propose a new long-memory model with a time-varying fractional integration parameter, evolving non-linearly according to a Logistic Smooth Transition Autoregressive (LSTAR) specification. To estimate the time-varying fractional integration parameter, we implement a method based on the wavelet approach, using the instantaneous least squares estimator (ILSE). The empirical results show the relevance of the modeling approach and provide evidence of regime change in inflation persistence that contributes to a better understanding of the inflationary process in the US. Most importantly, these empirical findings remind us that a "one-size-fits-all" monetary policy is unlikely to work in all circumstances.

Keywords: Time-varying long-memory, LSTAR model, MODWT algorithm, ILSE estimator

JEL Classification: C13, C22, C32, C54, E31

Suggested Citation

Boubaker, Heni and Canarella, Giorgio and Gupta, Rangan and Miller, Stephen M., Time-Varying Persistence of Inflation: Evidence from a Wavelet-Based Approach (August 19, 2016). Studies in Nonlinear Dynamics and Econometrics, September 2017. Available at SSRN: https://ssrn.com/abstract=2826785 or http://dx.doi.org/10.2139/ssrn.2826785

Heni Boubaker

IPAG Business School ( email )

184 BD Saint Germain
Paris, 75006
France

Giorgio Canarella

California State University, Los Angeles - Department of Economics & Statistics ( email )

Los Angeles
Los Angeles, CA 90032
United States

University of Nevada, Las Vegas ( email )

4505 S. Maryland Parkway
Las Vegas, NV 89154
United States

Rangan Gupta

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria, 0002
South Africa

Stephen M. Miller (Contact Author)

University of Nevada, Las Vegas - Department of Economics ( email )

4505 S. Maryland Parkway
Box 456005
Las Vegas, NV 89154
United States
702-895-3776 (Phone)
702-895-1354 (Fax)

HOME PAGE: http://faculty.unlv.edu/smiller/

University of Connecticut - Department of Economics

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States

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