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Some Evidence Of Smooth Transition Nonlinearity In Colombian Inflation

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  • Luis Eduardo Arango

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  • Andrés González

Abstract

Evidence of smooth transition autoregressive (STAR) representations is found in two, out of three, time series of different measures of annual inflation in Colombia during this decade for monthly data. The STAR-type nonlinearities are asymmetric for inflation computed as the variation of CPI while for (a measure of ) core inflation are symmetric. Thus, LSTAR and ESTAR models were, respectively, estimated. No evidence of nonlinearity is found for traded goods inflation. Given the local dynamic properties of the estimated LSTAR model, only positive shocks to prices could shift negative accelerating inflation rate from the upper to the lower regime. By the same token, only stochastic shocks can move the core accelerating inflation rate from the outer regime to the middle one but the explosive nature of this regime will impulse the accelerating inflation rate to the outer one.

Suggested Citation

  • Luis Eduardo Arango & Andrés González, 1998. "Some Evidence Of Smooth Transition Nonlinearity In Colombian Inflation," BORRADORES DE ECONOMIA 003515, BANCO DE LA REPÚBLICA.
  • Handle: RePEc:col:000094:003515
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    Cited by:

    1. Faria, João Ricardo & Cuestas, Juan Carlos & Mourelle, Estefanía, 2010. "Entrepreneurship and unemployment: A nonlinear bidirectional causality?," Economic Modelling, Elsevier, vol. 27(5), pages 1282-1291, September.
    2. Li, Yushu & Shukur, Ghazi, 2009. "Testing for Unit Root against LSTAR Model: Wavelet Improvement under GARCH Distortion," CAFO Working Papers 2009:6, Linnaeus University, Centre for Labour Market Policy Research (CAFO), School of Business and Economics.
    3. Juan Carlos Cuestas & Estefanía Mourelle, 2009. "Inflation persistence and asymmetries: evidence for African countries," Working Papers 2009/2, Nottingham Trent University, Nottingham Business School, Economics Division.
    4. Rocha, Jordano Vieira & Pereira, Pedro L. Valls, 2015. "Forecast comparison with nonlinear methods for Brazilian industrial production," Textos para discussão 397, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    5. Pillai N., Vijayamohanan, 2008. "In Quest of Truth: The War of Methods in Economics," MPRA Paper 8866, University Library of Munich, Germany.
    6. Luis Fernando Melo & Martha Misas A., 2004. "Modelos Estructurales de Inflación en Colombia: Estimación a Través de Mínimos Cuadrados Flexibles," Borradores de Economia 283, Banco de la Republica de Colombia.
    7. Kulaksizoglu, Tamer & Kulaksizoglu, Sebnem, 2009. "The U.S. Excess Money Growth and Inflation Relation in the Long-Run: A Nonlinear Analysis," MPRA Paper 23780, University Library of Munich, Germany.
    8. Georgios P. Kouretas & Mark E. Wohar, 2012. "The dynamics of inflation: a study of a large number of countries," Applied Economics, Taylor & Francis Journals, vol. 44(16), pages 2001-2026, June.
    9. Andrew Phiri, 2012. "Threshold effects and inflation persistence in South Africa," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 4(3), pages 247-269, July.
    10. Luis Alberiko Gil-Alaña & Juan C. Cuestas & Estefania Mourelle, 2011. "Is there asymmetric behaviour in African inflation? A non-linear approach," NCID Working Papers 03/2011, Navarra Center for International Development, University of Navarra.
    11. Martha Misas Arango & Enrique López Enciso & Pablo Querubín, 2002. "La Inflación En Colombia: Una Aproximación Desde Las Redes Neuronales," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 20(41-42), pages 143-214, June.
    12. María Clara Aristizábal Restrepo, 2006. "Evaluación asimétrica de una red neuronal artificial:Aplicación al caso de la inflación en Colombia," Borradores de Economia 377, Banco de la Republica de Colombia.
    13. Munir A. Jalil & Luis Fernando Melo, 2000. "Una Relación no Líneal entre Inflación y los Medios de Pago," Borradores de Economia 145, Banco de la Republica de Colombia.
    14. Arize, Augustine C. & Malindretos, John, 2012. "Nonstationarity and nonlinearity in inflation rate: Some further evidence," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 224-234.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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