Persistence, Mean Reversion and Nonlinearities in Inflation Rates of Developed and Developing Countries Using Over One Century of Data

13 Pages Posted: 11 Dec 2018

See all articles by Luis Alberiko Gil‐Alana

Luis Alberiko Gil‐Alana

University of Navarra

Rangan Gupta

University of Pretoria - Department of Economics

Date Written: January 2019

Abstract

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.

Suggested Citation

Gil‐Alana, Luis Alberiko and Gupta, Rangan, Persistence, Mean Reversion and Nonlinearities in Inflation Rates of Developed and Developing Countries Using Over One Century of Data (January 2019). The Manchester School, Vol. 87, Issue 1, pp. 24-36, 2019. Available at SSRN: https://ssrn.com/abstract=3299646 or http://dx.doi.org/10.1111/manc.12213

Luis Alberiko Gil‐Alana (Contact Author)

University of Navarra

Camino del Cerro del Aguila, 3
Pamplona, 31080
Spain

Rangan Gupta

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria, 0002
South Africa

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