Inflation persistence and structural breaks
Purpose The purpose of this paper is to report on a sequential three-stage analysis of inflation persistence using monthly data from 11 inflation targeting (IT) countries and, for comparison, the USA, a non-IT country with a history of credible monetary policy. Design/methodology/approach First, the...
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cremerald:10.1108/jes-10-2015-0190 2024-06-23T07:54:05+00:00 Inflation persistence and structural breaks The experience of inflation targeting countries and the USA Canarella, Giorgio Miller, Stephen M. 2016 http://dx.doi.org/10.1108/jes-10-2015-0190 http://www.emeraldinsight.com/doi/full-xml/10.1108/JES-10-2015-0190 https://www.emerald.com/insight/content/doi/10.1108/JES-10-2015-0190/full/xml https://www.emerald.com/insight/content/doi/10.1108/JES-10-2015-0190/full/html en eng Emerald https://www.emerald.com/insight/site-policies Journal of Economic Studies volume 43, issue 6, page 980-1005 ISSN 0144-3585 journal-article 2016 cremerald https://doi.org/10.1108/jes-10-2015-0190 2024-06-05T04:05:49Z Purpose The purpose of this paper is to report on a sequential three-stage analysis of inflation persistence using monthly data from 11 inflation targeting (IT) countries and, for comparison, the USA, a non-IT country with a history of credible monetary policy. Design/methodology/approach First, the authors estimate inflation persistence in a rolling-window fractional-integration setting using the semiparametric estimator suggested by Phillips (2007). Second, the authors use tests for unknown structural breaks as a means to identify effects of the regime switch and the global financial crisis on inflation persistence. The authors use the sequences of estimated persistence measures from the first stage as dependent variables in the Bai and Perron (2003) structural break tests. Finally, the authors reapply the Phillips (2007) estimator to the subsamples defined by the breaks. Findings Four countries (Canada, Iceland, Mexico, and South Korea) experience a structural break in inflation persistence that coincide with the implementation of the IT regime, and three IT countries (Sweden, Switzerland, and the UK), as well as the USA experience a structural break in inflation persistence that coincides with the global financial crisis. Research limitations/implications The authors find that in most cases the estimates of inflation persistence switch from mean-reversion nonstationarity to mean-reversion stationarity. Practical implications Monetary policy implications differ between pre- and post-global financial crisis. Social implications Global financial crisis affected the persistence of inflation rates. Originality/value First paper to consider the effect of the global financial crisis on inflation persistence. Article in Journal/Newspaper Iceland Emerald Canada Journal of Economic Studies 43 6 980 1005 |
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Purpose The purpose of this paper is to report on a sequential three-stage analysis of inflation persistence using monthly data from 11 inflation targeting (IT) countries and, for comparison, the USA, a non-IT country with a history of credible monetary policy. Design/methodology/approach First, the authors estimate inflation persistence in a rolling-window fractional-integration setting using the semiparametric estimator suggested by Phillips (2007). Second, the authors use tests for unknown structural breaks as a means to identify effects of the regime switch and the global financial crisis on inflation persistence. The authors use the sequences of estimated persistence measures from the first stage as dependent variables in the Bai and Perron (2003) structural break tests. Finally, the authors reapply the Phillips (2007) estimator to the subsamples defined by the breaks. Findings Four countries (Canada, Iceland, Mexico, and South Korea) experience a structural break in inflation persistence that coincide with the implementation of the IT regime, and three IT countries (Sweden, Switzerland, and the UK), as well as the USA experience a structural break in inflation persistence that coincides with the global financial crisis. Research limitations/implications The authors find that in most cases the estimates of inflation persistence switch from mean-reversion nonstationarity to mean-reversion stationarity. Practical implications Monetary policy implications differ between pre- and post-global financial crisis. Social implications Global financial crisis affected the persistence of inflation rates. Originality/value First paper to consider the effect of the global financial crisis on inflation persistence. |
format |
Article in Journal/Newspaper |
author |
Canarella, Giorgio Miller, Stephen M. |
spellingShingle |
Canarella, Giorgio Miller, Stephen M. Inflation persistence and structural breaks |
author_facet |
Canarella, Giorgio Miller, Stephen M. |
author_sort |
Canarella, Giorgio |
title |
Inflation persistence and structural breaks |
title_short |
Inflation persistence and structural breaks |
title_full |
Inflation persistence and structural breaks |
title_fullStr |
Inflation persistence and structural breaks |
title_full_unstemmed |
Inflation persistence and structural breaks |
title_sort |
inflation persistence and structural breaks |
publisher |
Emerald |
publishDate |
2016 |
url |
http://dx.doi.org/10.1108/jes-10-2015-0190 http://www.emeraldinsight.com/doi/full-xml/10.1108/JES-10-2015-0190 https://www.emerald.com/insight/content/doi/10.1108/JES-10-2015-0190/full/xml https://www.emerald.com/insight/content/doi/10.1108/JES-10-2015-0190/full/html |
geographic |
Canada |
geographic_facet |
Canada |
genre |
Iceland |
genre_facet |
Iceland |
op_source |
Journal of Economic Studies volume 43, issue 6, page 980-1005 ISSN 0144-3585 |
op_rights |
https://www.emerald.com/insight/site-policies |
op_doi |
https://doi.org/10.1108/jes-10-2015-0190 |
container_title |
Journal of Economic Studies |
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43 |
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6 |
container_start_page |
980 |
op_container_end_page |
1005 |
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1802646031665463296 |