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Long Memory Inflationary Dynamics: The Case of Brazil

Listed author(s):
  • Reisen Valderio A

    (University Federal do Espirito Santo)

  • Cribari-Neto Francisco

    (University Federal de Pernambuco)

  • Jensen Mark J

    ()

    (Brigham Young University)

It has been argued by several authors that the inflationary dynamics in Brazil follow a unit root process, thus displaying some inertia. Indeed, Cati, et al. (Journal of Applied Econometrics, 1999) have found that the inflationary dynamics in Brazil are nearly fully inertial. We estimate the fractional differencing parameter using an ARFIMA specification for the inflation rate in that country and our results suggest that the inflationary dynamics are better modeled by a long memory process than by a unit root mechanism, thus implying that there is no inertia in inflation, contrary to what has been found by other researchers. We also found that the estimates of the fractional parameter are invariant to first differencing.

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Article provided by De Gruyter in its journal Studies in Nonlinear Dynamics & Econometrics.

Volume (Year): 7 (2003)
Issue (Month): 3 (October)
Pages: 1-18

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Handle: RePEc:bpj:sndecm:v:7:y:2003:i:3:n:3
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  1. Sowell, Fallaw, 1992. "Maximum likelihood estimation of stationary univariate fractionally integrated time series models," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 165-188.
  2. Bisaglia, Luisa & Guegan, Dominique, 1998. "A comparison of techniques of estimation in long-memory processes," Computational Statistics & Data Analysis, Elsevier, vol. 27(1), pages 61-81, March.
  3. Philip Hans Franses & Marius Ooms & Charles S. Bos, 1999. "Long memory and level shifts: Re-analyzing inflation rates," Empirical Economics, Springer, vol. 24(3), pages 427-449.
  4. Diebold, Francis X. & Rudebusch, Glenn D., 1991. "On the power of Dickey-Fuller tests against fractional alternatives," Economics Letters, Elsevier, vol. 35(2), pages 155-160, February.
  5. Lobato, I. & Robinson, P. M., 1996. "Averaged periodogram estimation of long memory," Journal of Econometrics, Elsevier, vol. 73(1), pages 303-324, July.
  6. Velasco, Carlos, 1999. "Non-stationary log-periodogram regression," Journal of Econometrics, Elsevier, vol. 91(2), pages 325-371, August.
  7. Luisa Bisaglia & Dominique Guegan, 1998. "A comparison of techniques of estimation in long-memory processes," Post-Print halshs-00194462, HAL.
  8. Cati, Regina Celia & Garcia, Marcio G P & Perron, Pierre, 1999. "Unit Roots in the Presence of Abrupt Governmental Interventions with an Application to Brazilian Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(1), pages 27-56, Jan.-Feb..
  9. Lee, Hyung S. & Amsler, Christine, 1997. "Consistency of the KPSS unit root test against fractionally integrated alternative," Economics Letters, Elsevier, vol. 55(2), pages 151-160, August.
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