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Mean reversion of inflation rates in 19 OECD countries: Evidence from panel Lm unit root tests with structural breaks

  • Chien-Chiang Lee


    (Department of Applied Economics, National Chung Hsing University)

  • Chun-Ping Chang


    (Institute for Interdisciplinary Studies, National Sun Yat-sen University)

The paper applies the recently developed panel LM unit root tests with heterogeneous structural breaks by Im et al., [The Oxford Bulletin of Economics and Statistics, 2005] in order to re-examine the validity of mean reversion in the inflation rates of 19 OECD countries for the time period 1960-2004. Our empirical findings are favorable to the stationarity of the inflation ratesand therefore point to the absence of hyperinflation in the majority of the countries. The results indicate that most shocks to inflation rates are temporary and soon converge when we control for breaks, with the inflation rates showing mean reversion. Overall, some policy implications are obtained in this paper.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 3 (2007)
Issue (Month): 23 ()
Pages: 1-15

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Handle: RePEc:ebl:ecbull:eb-05c30022
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