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Long-memory modeling and forecasting: evidence from the U.S. historical series of inflation

Author

Listed:
  • Boubaker Heni

    (Rabat Business School, BEAR LAB (UIR), Technopolis Rabat-Shore, 11100Rabat-Salé, Morocco)

  • Canarella Giorgio
  • Miller Stephen M.

    (University of Nevada, Las Vegas, 4505 S. Maryland Parkway, Las Vegas, Nevada, USA)

  • Gupta Rangan

    (University of Pretoria, Pretoria, 0002, South Africa)

Abstract

We report the results of applying several long-memory models to the historical monthly U.S. inflation rate series and analyze their out-of-sample forecasting performance over different horizons. We find that the time-varying approach to estimating inflation persistence outperforms the models that assume a constant long-memory process. In addition, we examine the link between inflation persistence and exchange rate regimes. Our results support the hypothesis that floating exchange rates associate with increased inflation persistence. This finding, however, is less pronounced during the era of the Great Moderation and the Federal Reserve System’s commitment to inflation targeting.

Suggested Citation

  • Boubaker Heni & Canarella Giorgio & Miller Stephen M. & Gupta Rangan, 2021. "Long-memory modeling and forecasting: evidence from the U.S. historical series of inflation," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 25(5), pages 289-310, December.
    • Handle: RePEc:bpj:sndecm:v:25:y:2021:i:5:p:289-310:n:4
    DOI: 10.1515/snde-2018-0116
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    More about this item

    Keywords

    long memory; time-varying persistence; U.S. inflation; wavelet analysis;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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