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Persistence, Mean Reversion and Nonlinearities in Inflation Rates of Developed and Developing Countries Using Over One Century of Data

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  • Luis Alberiko Gil‐Alana
  • Rangan Gupta

Abstract

This study examines inflation over one century of data for 29 countries based on fractional integration incorporating nonlinearities to account for structural breaks and asymmetry in the process of inflation. The results suggest that the degree of persistence is that, while there is evidence of long‐memory behavior in the inflation rates of 17 countries, barring Russia, none of the remaining 28 countries indicate evidence of unit roots. The result implies that monetary authorities in these countries can play a role in controlling inflation, though the extent of intervention required will tend to vary, with the strongest being in Russia.

Suggested Citation

  • Luis Alberiko Gil‐Alana & Rangan Gupta, 2019. "Persistence, Mean Reversion and Nonlinearities in Inflation Rates of Developed and Developing Countries Using Over One Century of Data," Manchester School, University of Manchester, vol. 87(1), pages 24-36, January.
    • Handle: RePEc:bla:manchs:v:87:y:2019:i:1:p:24-36
    DOI: 10.1111/manc.12213
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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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