Multiple Structural Breaks and Inflation Persistance in Belarus
AbstractThis paper address the issue of assessing inflation persistence in Belarus using quarterly seasonally adjusted data over 1996â€“2011. To detect multiple structural breaks during the analyzed period, we applied recently developed and practically implemented in OxMetrics software impulse indicator saturation technique. Impulse indicator saturation break test allowed us to detect three structural breaks in dynamics of GDP deflator inflation and CPI inflation, including one at the end of the examined sample. All detected break dates have a clear-cut economic interpretation. Taking these structural brakes into account, while testing for dynamics properties of inflation and its persistence, we found that GDP deflator inflation and CPI inflation in Belarus are stationary variables with the changing means. Formal unit root testing with multiple structural breaks demonstrated that non-stationarity is rejected at one per cent significance level. The point estimates if inflation persistence for GDP deflator and CPI inflation are quite small (0.32 and 0.53 respectively). GDP deflator inflation and CPI inflation return to its equilibrium level after a shock in about 1.5 and 2 quarter correspondently. Thus, one can consider inflation persistence in Belarus over the sample period as a quite moderate. These results have the explicit policy implications. Low inflation persistence in Belarus is a sound prerequisite for macroeconomic stabilization and anti-inflation monetary policy. Additionally, the stationarity of inflation can be considered as an important element of the technical possibilities of implementing inflation targeting in Belarus.
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Bibliographic InfoPaper provided by Belarusian Economic Research and Outreach Center (BEROC) in its series BEROC Working Paper Series with number 21.
Length: 21 pages
Date of creation: Dec 2012
Date of revision:
inflation persistence; univariate model; multiple structural brakes; means reversion; impulse indicator saturation; Autometrics;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
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