A Time Series Approach to Test a Change in Inflation Persistence: The Mexican Experience

Daniel Chiquiar, Antonio Noriega () and Manuel Ramos Francia

No 2007-01, Working Papers from Banco de México

Abstract: When monetary policy has an explicit inflation target, observed inflation should be a stationary process. In countries where, for a variety of reasons, the determinants of inflation could lead it to follow a non-stationary process, the adoption of an inflation targeting framework should therefore induce a fundamental change in the stochastic process governing inflation. This paper studies the time series properties of Mexican inflation during 1995-2006, using recently developed techniques to detect a change in the persistence of economic time series. Consistent with the adoption of an inflation-targeting framework, the results suggest that inflation in Mexico seems to have switched from a nonstationary to a stationary process around the end of year 2000 or the beginning of 2001.

JEL-codes: C12 C22 E31 E52 E58 (search for similar items in EconPapers)
Date: 2007-01
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:bdm:wpaper:2007-01

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