EconPapers    
Economics at your fingertips  
 

Asymmetric Behaviour of Inflation around the Target in Inflation-Targeting Countries

Kurmaş Akdoğan

Scottish Journal of Political Economy, 2015, vol. 62, issue 5, 486-504

Abstract: type="main" xml:id="sjpe12089-abs-0001">

We explore the asymmetric behaviour of inflation around the target level for inflation-targeting countries. The first rationale behind this asymmetry is the asymmetric policy response of the central bank around the target. Central banks could have a stronger bias towards overshooting rather than undershooting the inflation target. Consequently, the policy response would be stronger once the inflation jumps above the target, compared to a negative deviation. Second rationale is the asymmetric inflation persistence. We suggest that recently developed Asymmetric Exponential Smooth Transition Autoregressive (AESTAR) model provides a convenient framework to capture the asymmetric behaviour of inflation driven by these two effects. We further conduct an out-of-sample forecasting exercise and show that the predictive power of AESTAR model for inflation is high for some countries in our sample, especially at long-horizons.

Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://hdl.handle.net/10.1111/sjpe.2015.62.issue-5 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:scotjp:v:62:y:2015:i:5:p:486-504

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0036-9292

Access Statistics for this article

Scottish Journal of Political Economy is currently edited by Tim Barmby, Andrew Hughes-Hallett and Campbell Leith

More articles in Scottish Journal of Political Economy from Scottish Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2025-03-19
Handle: RePEc:bla:scotjp:v:62:y:2015:i:5:p:486-504