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Which is the best model for the US inflation rate : a structural changes model or a long memory process ?

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Author Info

  • Lanouar Charfeddine

    ()
    (OEP - Université Paris-Est Marne-la-Vallée (UPEMLV))

  • Dominique Guegan

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

Abstract

This paper analyzes the dynamics of the US inflation series using two classes of models : structural changes models and Long memory processes. For the first class, we use the Markov Switching (MS-AR) model of Hamilton (1989) and the Structural Change (SCH-AR) model using the sequential method proposed by Bai and Perron (1998, 2003). For the second class, we use the ARFIMA process developed by Granger and Joyeux (1980). Moreover, we investigate whether the observed long memory behavior is a true behavior or a spurious behavior created by the presence of breaks in time series. Our empirical results provide evidence for changes in mean, breaks dates coincide exactly with some economic and financial events such Vietnam War and the two oil price shocks. Moreover, we show that the observed long memory behavior is spurious and is due to the presence of breaks in data set.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00188309.

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Date of creation: Nov 2007
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Handle: RePEc:hal:cesptp:halshs-00188309

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00188309
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Related research

Keywords: Structural breaks models; long range dependance; inflation series.;

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Cited by:
  1. Dominique Guegan & Philippe De Peretti, 2011. "An Omnibus Test to Detect Time-Heterogeneity in Time Series," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers), HAL halshs-00560221, HAL.
  2. Dominique Guegan & Philippe de Peretti, 2011. "Tests of Structural Changes in Conditional Distributions with Unknown Changepoints," Documents de travail du Centre d'Economie de la Sorbonne, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne 11042, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  3. Lanouar Charfeddine & Dominique Guegan, 2009. "Breaks or Long Memory Behaviour : An empirical Investigation," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers), HAL halshs-00377485, HAL.
  4. repec:hal:journl:halshs-00377485 is not listed on IDEAS
  5. Slim Chaouachi & Zied Ftiti & Frederic Teulon, 2014. "Explaining the Tunisian Real Exchange: Long Memory versus Structural Breaks," Working Papers, Department of Research, Ipag Business School 2014-147, Department of Research, Ipag Business School.
  6. Peter Smith, 2010. "Discussion of the Fisher Effect Puzzle: A Case of Non-Linear Relationship," Open Economies Review, Springer, Springer, vol. 21(1), pages 105-108, February.
  7. repec:hal:wpaper:halshs-00721327 is not listed on IDEAS
  8. repec:hal:wpaper:halshs-00722032 is not listed on IDEAS

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