Euro-zone Inflation Rates: Stationary or Regime-wise Stationary Processes
AbstractThis study investigates the stationary behavior of the inflation rates for the Euro-zone members and some neighboring countries, for the 1957:2 to 2007:3 period. The analysis uses univariate unit root tests with enhanced small-sample performances that allow up to two breaks in the intercept, namely those of Elliott et al. (1996) and Lopez (2008). The results strongly reject the unit root null hypothesis for all the countries. Furthermore, they demonstrate that some of the Euro-zone inflation rates are stationary and others are regime-wise stationary. While such results may reconcile some of the literature findings and provide empirical evidence that the Maastricht criterion is respected, they also highlight the importance of accounting for breaks when studying these series. Finally, none of the identified breaks take place in the post Euro era.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 29 (2009)
Issue (Month): 1 ()
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Other versions of this item:
- Claude Lopez, 2008. "Euro-zone Inflation Rates: Stationary or Regime-wise Stationary Processes," University of Cincinnati, Economics Working Papers Series 2008-02, University of Cincinnati, Department of Economics, revised 2008.
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
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27929, University Library of Munich, Germany.
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