Inflation Persistence in the SCO Countries: A Fractional Integration Approach

This paper uses fractional integration methods to analyse the long-memory and persistence properties of inflation in the Shanghai Cooperation Organization (SCO) countries over the period from 1 January 1997 to 8 January 2025. This approach is more general than standard models based on the I(0) versus I(1) dichotomy, and is particularly suitable in the case of emerging countries such as the SCO ones, who have experienced structural change and different policy frameworks. Regardless of the assumption made about the errors in the model, the estimates of the fractional differencing parameter are found to imply unit root or explosive behaviour. This means that the effects of shocks tend to be long-lived, and thus decisive monetary policy actions appear to be required to bring inflation under control. Further, the subsample analysis suggests that the Russian invasion of Ukraine did not affect significantly the stochastic properties of the series under examination.