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Detecting multiple breaks in long memory the case of U.S. inflation

  • Uwe Hassler

    ()

  • Barbara Meller

    ()

Multiple structural change tests by Bai and Perron (Econometrica 66:47–78, 1998 ) are applied to the regression by Demetrescu et al. (Econ Theory 24:176–215, 2008 ) in order to detect breaks in the order of fractional integration. With this instrument we tackle time-varying inflation persistence as an important issue for monetary policy. We determine not only the location and significance of breaks in persistence, but also the number of breaks. Only one significant break in U.S. inflation persistence (measured by the long-memory parameter) is found to have taken place in 1973, while a second break in 1980 is not significant. Copyright Springer-Verlag Berlin Heidelberg 2014

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Article provided by Springer in its journal Empirical Economics.

Volume (Year): 46 (2014)
Issue (Month): 2 (March)
Pages: 653-680

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Handle: RePEc:spr:empeco:v:46:y:2014:i:2:p:653-680
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  17. Baillie, Richard T. & Kapetanios, George, 2007. "Testing for Neglected Nonlinearity in Long-Memory Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 447-461, October.
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