Identifying Changes in Mean, Seasonality, Persistence and Volatility for G7 and Euro Area Inflation
This study examines the properties of monthly CPI inflation in G7 countries and the Euro area (aggregate) over the period 1973-2007 using a new iterative decomposition procedure that separates changes in mean, seasonal and dynamic components together with conditional volatility. We uncover mean and seasonality breaks for all countries and, even allowing for these, changes in persistence are indicated for all countries except Canada. Further, while volatility reductions are widespread in the mid- to early 1980s, Canada, France and the US all exhibit increased volatility from 1999 onwards. Of methodological interest, iteration is shown to provide more evidence of persistence breaks and fewer volatility breaks overall compared with the usual approach of sequentially examining changes in the properties of inflation, while application of linear seasonal adjustment also reduces evidence of persistence breaks. Although failure to allow for breaks in mean, seasonal or dynamic components affects conclusions about the existence and dates of volatility breaks, nevertheless, evidence remains of a volatility increase in some countries in 1999.
|Date of creation:||2008|
|Contact details of provider:|| Postal: Manchester M13 9PL|
Phone: (0)161 275 4868
Fax: (0)161 275 4812
Web page: http://www.socialsciences.manchester.ac.uk/subjects/economics/our-research/centre-for-growth-and-business-cycle-research/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Levin, Andrew T. & Piger, Jeremy M., 2004. "Is inflation persistence intrinsic in industrial economies?," Working Paper Series 334, European Central Bank.
- van Dijk, Dick & Franses, Philip Hans & Lucas, Andre, 1999.
"Testing for ARCH in the Presence of Additive Outliers,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 14(5), pages 539-562, Sept.-Oct.
- van Dijk, D.J.C. & Franses, Ph.H.B.F. & Lucas, A., 1996. "Testing for ARCH in the Presence of Additive Outliers," Econometric Institute Research Papers EI 9659-/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- Benati, Luca, 2008. "Investigating inflation persistence across monetary regimes," Working Paper Series 851, European Central Bank.
- Ghysels,Eric & Osborn,Denise R., 2001. "The Econometric Analysis of Seasonal Time Series," Cambridge Books, Cambridge University Press, number 9780521565882, December.
- Ghysels,Eric & Osborn,Denise R., 2001. "The Econometric Analysis of Seasonal Time Series," Cambridge Books, Cambridge University Press, number 9780521562607, November.
- Bilke, Laurent, 2005. "Break in the mean and persistence of inflation: a sectoral analysis of French CPI," Working Paper Series 463, European Central Bank. Full references (including those not matched with items on IDEAS)