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Multiple Structural Breaks and Inflation Persistance in Belarus

  • Igor Pelipas
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    This paper address the issue of assessing inflation persistence in Belarus using quarterly seasonally adjusted data over 1996–2011. To detect multiple structural breaks during the analyzed period, we applied recently developed and practically implemented in OxMetrics software impulse indicator saturation technique. Impulse indicator saturation break test allowed us to detect three structural breaks in dynamics of GDP deflator inflation and CPI inflation, including one at the end of the examined sample. All detected break dates have a clear-cut economic interpretation. Taking these structural brakes into account, while testing for dynamics properties of inflation and its persistence, we found that GDP deflator inflation and CPI inflation in Belarus are stationary variables with the changing means. Formal unit root testing with multiple structural breaks demonstrated that non-stationarity is rejected at one per cent significance level. The point estimates if inflation persistence for GDP deflator and CPI inflation are quite small (0.32 and 0.53 respectively). GDP deflator inflation and CPI inflation return to its equilibrium level after a shock in about 1.5 and 2 quarter correspondently. Thus, one can consider inflation persistence in Belarus over the sample period as a quite moderate. These results have the explicit policy implications. Low inflation persistence in Belarus is a sound prerequisite for macroeconomic stabilization and anti-inflation monetary policy. Additionally, the stationarity of inflation can be considered as an important element of the technical possibilities of implementing inflation targeting in Belarus.

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    File URL: http://eng.beroc.by/webroot/delivery/files/WP21_eng_Pelipas.pdf
    File Function: First version, 2012
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    Paper provided by Belarusian Economic Research and Outreach Center (BEROC) in its series BEROC Working Paper Series with number 21.

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    Length: 21 pages
    Date of creation: Dec 2012
    Date of revision:
    Handle: RePEc:bel:wpaper:21
    Contact details of provider: Web page: http://www.beroc.by
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    1. Daniel Dias & Carlos Robalo Marques, 2005. "Using Mean Reversion as a Measure of Persistence," Working Papers w200503, Banco de Portugal, Economics and Research Department.
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    8. Igor Pelipas, 2011. "Structural Breaks and Dynamic Characteristics of Inflation and Growth Rates of Monetary Aggregates," BEROC Working Paper Series 15, Belarusian Economic Research and Outreach Center (BEROC).
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    12. Robalo Marques, Carlos, 2004. "Inflation persistence: facts or artefacts?," Working Paper Series 0371, European Central Bank.
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