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Intrinsic Inflation Persistence in a Developing Country

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  • Hanif, M. Nadim
  • Malik, Muhammad Jahanzeb
  • Iqbal, Javed

Abstract

This study estimates degree of intrinsic inflation persistence in Pakistan using aggregate price index, group level price indices, and individual commodity prices. We find no evidence of a unit root in (MoM) inflation at any level, except for house rent. Using monthly data from 1959 to 2011 we find that the estimate of (overall) inflation persistence is 0.16, which is low but significant. During 2001-2011 (overall) inflation persistence is insignificant. Food inflation does not exhibit any persistence during the last decade. However, the degree of persistence is very high (0.80) and significant for core inflation (NFNE), which weakens slightly (to 0.69) when we account for commodities price shock of 2008. At micro level, the estimated degree of inflation persistence for various groups is found to be relatively higher, in almost 60 percent of the cases, compared to corresponding degree of persistence at aggregate level. This may be because in micro analysis we consider only those commodities for which the estimated degree of inflation persistence is significant.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 39583.

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Date of creation: 21 Jun 2012
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Handle: RePEc:pra:mprapa:39583
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Keywords: Persistence; Inflation; Food Inflation; Core Inflation;

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Find related papers by JEL classification:
  • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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Cited by:

  1. Hanif, Muhammad Nadim, 2014. "Monetary Policy Experience of Pakistan," MPRA Paper 60855, University Library of Munich, Germany.
  2. Shahzad Ahmad & Farooq Pasha, 2015. "A Pragmatic Model for Monetary Policy Analysis I: The Case of Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 11, pages 1-42.
  3. Hanif, Muhammad Nadim, 2012. "A Note on Food Inflation in Pakistan," MPRA Paper 45009, University Library of Munich, Germany, revised 11 Mar 2013.

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