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A time-series approach to test a change in inflation persistence: the Mexican experience

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  • Daniel Chiquiar
  • Antonio Noriega
  • Manuel Ramos-Francia

Abstract

When a central bank commits credibly to a nonaccommodative monetary policy, observed inflation should be a stationary process. In countries where, for a variety of reasons, the determinants of inflation could lead it to follow a nonstationary process, the adoption of a credible disinflationary programme should therefore induce a fundamental change in the stochastic process governing inflation and, in particular, should diminish its persistence. This article studies the time-series properties of both inflation and core inflation during the 1995-2006 period for the Mexican economy, using recently developed techniques to detect a change in the persistence of economic time series. Consistently with the adoption of an inflation-targeting framework, the results suggest that inflation in Mexico seems to have indeed switched from a nonstationary to a stationary process around the end of year 2000 or the beginning of 2001.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 42 (2010)
Issue (Month): 24 ()
Pages: 3067-3075

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Handle: RePEc:taf:applec:v:42:y:2010:i:24:p:3067-3075

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References

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Citations

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Cited by:
  1. Carlos Capistrán & Gabriel López-Moctezuma, 2010. "Forecast Revisions of Mexican Inflation and GDP Growth," Working Papers 2010-11, Banco de México.
  2. Capistrán, Carlos & López-Moctezuma, Gabriel, 2014. "Forecast revisions of Mexican inflation and GDP growth," International Journal of Forecasting, Elsevier, vol. 30(2), pages 177-191.
  3. Robinson Durán & Evelyn Garrido & Carolina Godoy & Juan de Dios Tena, 2012. "Predicción de la inflación en México con modelos desagregados por componente," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 27(1), pages 133-167.
  4. Santiago García-Verdú, 2011. "On the Term Structure of Interest Rates of the Mexican Government," Working Papers 2011-18, Banco de México.
  5. Carlos Capistrán & Christian Constandse & Manuel Ramos Francia, 2009. "Using Seasonal Models to Forecast Short-Run Inflation in Mexico," Working Papers 2009-05, Banco de México.
  6. Raúl Ibarra-Ramírez, 2010. "Forecasting Inflation in Mexico Using Factor Models: Do Disaggregated CPI Data Improve Forecast Accuracy?," Working Papers 2010-01, Banco de México.
  7. Man-Keung Tang & Xiangrong Yu, 2011. "Communication of Central Bank Thinking and Inflation Dynamics," IMF Working Papers 11/209, International Monetary Fund.
  8. José J. Sidaoui & Manuel Ramos-Francia, 2008. "The monetary transmission mechanism in Mexico: recent developments," BIS Papers chapters, in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 363-394 Bank for International Settlements.
  9. Carlos Capistrán & Gabriel López-Moctezuma, 2008. "Experts´ Macroeconomics Expectations: An Evaluation of Mexican Short-Run Forecasts," Working Papers 2008-11, Banco de México.
  10. José Julián Sidaoui & Carlos Capistrán & Daniel Chiquiar & Manuel Ramos Francia, 2009. "A Note on the Predictive Content of PPI over CPI Inflation: The Case of Mexico," Working Papers 2009-14, Banco de México.
  11. Josué Cortés Espada & Carlos Capistrán & Manuel Ramos-Francia & Alberto Torres, 2009. "An empirical analysis of the mexican term structure of interest rates," Economics Bulletin, AccessEcon, vol. 29(3), pages 2300-2313.
  12. Guillermo Benavides, 2010. "Forecasting Short-Run Inflation Volatility using Futures Prices: An Empirical Analysis from a Value at Risk Perspective," Working Papers 2010-12, Banco de México.
  13. Antonio E. Noriega & Manuel Ramos Francia, 2009. "On the dynamics of inflation persistence around the world," Working Papers 2009-02, Banco de México.
  14. Ibarra, Raul, 2012. "Do disaggregated CPI data improve the accuracy of inflation forecasts?," Economic Modelling, Elsevier, vol. 29(4), pages 1305-1313.
  15. Carla Ysusi, 2009. "Analysis of the Dynamics of Mexican Inflation Using Wavelets," Working Papers 2009-09, Banco de México.
  16. Ramos-Francia, Manuel & Torres, Alberto, 2008. "Inflation dynamics in Mexico: A characterization using the New Phillips curve," The North American Journal of Economics and Finance, Elsevier, vol. 19(3), pages 274-289, December.
  17. Capistrán, Carlos & Constandse, Christian & Ramos-Francia, Manuel, 2010. "Multi-horizon inflation forecasts using disaggregated data," Economic Modelling, Elsevier, vol. 27(3), pages 666-677, May.
  18. Carlos Capistrán & Raúl Ibarra-Ramírez & Manuel Ramos Francia, 2011. "Exchange Rate Pass-Through to Prices: Evidence from Mexico," Working Papers 2011-12, Banco de México.
  19. Yanli LI, Hongfeng PENG & Hongfeng PENG, 2013. "Inflation Persistence in Nine Latin American Countries: Panel SURKSS Test with a Fourier Function," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 132-143, October.
  20. Andrew Phiri, 2012. "Threshold effects and inflation persistence in South Africa," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 4(3), pages 247-269, August.
  21. Arnulfo Rodríguez & Pedro N. Rodríguez, 2007. "Recursive Thick Modeling and the Choice of Monetary Policy in Mexico," Working Papers 2007-04, Banco de México.
  22. Manuel Ramos Francia & Alberto Torres García, 2006. "Inflation Dynamics in Mexico: A Characterization Using the New Phillips Curve," Working Papers 2006-15, Banco de México.
  23. Santiago García-Verdú, 2012. "The Evolution of Inflation Expectations in Mexico," Working Papers 2012-06, Banco de México.

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