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Time-varying persistence of inflation: evidence from a wavelet-based approach

Author

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  • Boubaker Heni

    (IPAG LAB, IPAG Business School, Paris 75006, France)

  • Canarella Giorgio
  • Miller Stephen M.

    () (University of Nevada, Las Vegas, Las Vegas, Nevada 89154-6005, USA)

  • Gupta Rangan

    (University of Pretoria, Pretoria 0002, South Africa)

Abstract

We propose a new stochastic long-memory model with a time-varying fractional integration parameter, evolving non-linearly according to a Logistic Smooth Transition Autoregressive (LSTAR) specification. To estimate the time-varying fractional integration parameter, we implement a method based on the wavelet approach, using the instantaneous least squares estimator (ILSE). The empirical results show the relevance of the modeling approach and provide evidence of regime change in inflation persistence that contributes to a better understanding of the inflationary process in the US. Most importantly, these empirical findings remind us that a “one-size-fits-all” monetary policy is unlikely to work in all circumstances. The empirical results are consistent with newly developed tests of wavelet-based unit root and fractional Brownian motion.

Suggested Citation

  • Boubaker Heni & Canarella Giorgio & Miller Stephen M. & Gupta Rangan, 2017. "Time-varying persistence of inflation: evidence from a wavelet-based approach," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 21(4), pages 1-18, September.
  • Handle: RePEc:bpj:sndecm:v:21:y:2017:i:4:p:18:n:6
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    Cited by:

    1. Giorgio Canarella & Luis A. Gil-Alana & Rangan Gupta & Stephen M. Miller, 2016. "Modeling U.S. Historical Time-Series Prices and Inflation Using Various Linear and Nonlinear Long-Memory Approaches," Working Papers 201683, University of Pretoria, Department of Economics.

    More about this item

    Keywords

    ILSE estimator; LSTAR model; MODWT algorithm; time-varying long-memory;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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