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A Historical Perspective of Inflation in Latin America. A New Approach Based on Fractional Integration with a Structural Break

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  • Luis Gil-Alana
  • Carlos Pestana Barros

Abstract

This paper deals with the analysis of inflation in Latin America across the 20th century. We use annual data from 18 countries using a methodology based on fractional integration. However, given the structure of the inflation rates in these countries, we allow for the possibility of a structural break that is endogenously determined by the model. The results show that for most of the countries the break-date takes place in the late 1980s or early 1990s, and the orders of integration are in all cases higher than 0.5 and, in many cases, smaller than 1, implying non-stationary mean reverting behaviour.

Suggested Citation

  • Luis Gil-Alana & Carlos Pestana Barros, 2009. "A Historical Perspective of Inflation in Latin America. A New Approach Based on Fractional Integration with a Structural Break," International Economic Journal, Taylor & Francis Journals, vol. 23(2), pages 259-279.
  • Handle: RePEc:taf:intecj:v:23:y:2009:i:2:p:259-279
    DOI: 10.1080/10168730902903417
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    References listed on IDEAS

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    1. Arminio Fraga & Ilan Goldfajn & André Minella, 2004. "Inflation Targeting in Emerging Market Economies," NBER Chapters, in: NBER Macroeconomics Annual 2003, Volume 18, pages 365-416, National Bureau of Economic Research, Inc.
    2. Hofman, André A., 2000. "The economic development of Latin America in the twentieth century," Copublicaciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1650 edited by Eclac, July.
    3. repec:fip:fedgsq:y:2005:i:feb11 is not listed on IDEAS
    4. Ben S. Bernanke, 2005. "Inflation in Latin America: a new era?," Speech 88, Board of Governors of the Federal Reserve System (U.S.).
    5. de Melo, Jaime & Dhar, Sumana, 1992. "Lessons of trade liberalization in Latin America for economies in transition," Policy Research Working Paper Series 1040, The World Bank.
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