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Using mean reversion as a measure of persistence

Daniel Dias () and Carlos Marques ()

Economic Modelling, 2010, vol. 27, issue 1, 262-273

Abstract: This paper suggests a new scalar measure of persistence together with a companion estimator, which has the advantage of not requiring the specification and estimation of a model for the series under investigation. The statistical properties of the companion estimator are established, which allow tests of hypotheses to be performed, under very general conditions. The use of the new measure is illustrated by re-evaluating persistence of inflation for the United States and the Euro Area. The conclusions for the United States do not differ significantly from what has been found in previous empirical studies. However, for the Euro Area we find evidence of a significant break occurring in 2001/2002, such that persistence becomes virtually nil for the period that follows the launch of the euro and the implementation of a common monetary policy by the European Central Bank.

Keywords: Persistence; Mean; reversion; Non-parametric; estimator (search for similar items in EconPapers)
Date: 2010
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Related works:
Working Paper: Using mean reversion as a measure of persistence (2005) Downloads
Working Paper: Using Mean Reversion as a Measure of Persistence (2005) Downloads
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