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Inflation Persistence and Changes in the Monetary Regime: The Argentine Case

  • Laura D´Amato

    ()

    (Central Bank of Argentina)

  • Lorena Garegnani

    ()

    (Central Bank of Argentina)

  • Juan M. Sotes Paladino

    (Central Bank of Argentina)

We study the evolution of inflation persistence in Argentina between 1980 and 2007, a period in which significant changes in mean inflation can be detected by simple observation. We adopt both a timeseries univariate and a frequency-domain approach. Following the former perspective breaks in the mean are identified, with inflation being highly persistent during the high inflation period, but less persistent since the adoption of the Convertibility regime and the decline of the inflation rate afterwards. When we analyze the "low inflation" period separately, we are able to identify changes in both mean and persistence of inflation before and after the adoption of a managed float in 2002. In this sense, frequency-domain analysis shows that overall volatility in prices is significantly higher during the post-Convertibility regime, though the contribution of high-frequency (temporary and seasonal) movements to this volatility was relatively more important during the Convertibility regime.

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Paper provided by Central Bank of Argentina, Economic Research Department in its series BCRA Working Paper Series with number 200723.

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Length: 35 pages
Date of creation: Sep 2007
Date of revision:
Handle: RePEc:bcr:wpaper:200723
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  1. Fuhrer, Jeffrey C & Moore, George R, 1995. "Monetary Policy Trade-offs and the Correlation between Nominal Interest Rates and Real Output," American Economic Review, American Economic Association, vol. 85(1), pages 219-39, March.
  2. Carlos Capistrán & Manuel Ramos-Francia, 2009. "Inflation Dynamics In Latin America," Contemporary Economic Policy, Western Economic Association International, vol. 27(3), pages 349-362, 07.
  3. Filippo Altissimo & Laurent Bilke & Andrew Levin & Thomas Mathä & Benoit Mojon, 2006. "Sectoral and Aggregate Inflation Dynamics in the Euro Area," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 585-593, 04-05.
  4. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
  5. Ignazio Angeloni & Luc Aucremanne & Michael Ehrmann & Jordi Galí & Andrew Levin & Frank Smets, 2006. "New Evidence on Inflation Persistence and Price Stickiness in the Euro Area: Implications for Macro Modeling," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 562-574, 04-05.
  6. Jordi Galí & Mark Gertler, 1998. "Inflation dynamics: A structural econometric analysis," Economics Working Papers 341, Department of Economics and Business, Universitat Pompeu Fabra.
  7. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
  8. Paul Castillo & Alberto Humala & Vicente Tuesta, 2007. "Monetary Policy, Regime Shifts, and Inflation Uncertainty in Peru (1949-2006)," Working Papers 2007-005, Banco Central de Reserva del Perú.
  9. Altissimo, Filippo & Mojon, Benoit & Zaffaroni, Paolo, 2009. "Can aggregation explain the persistence of inflation?," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 231-241, March.
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