Estimating inflation persistence by quantile autoregression with quantile-specific unit roots

Wagner Gaglianone, Osmani Guillén and Francisco Rodrigues Figueiredo

Economic Modelling, 2018, vol. 73, issue C, 407-430

Abstract: In this paper we study inflation persistence, which is a key feature of inflation dynamics, related to how quickly a stationary inflation process reverts to its long-run equilibrium after a shock. Emerging economies with high inflation persistence need to adjust macroeconomic policies in a significant way to price shocks (e.g., at the cost of substantial output decrease), since these shocks can affect expectations and inflation for a much longer period. We propose a novel way to estimate inflation persistence by using a quantile autoregression (QAR) model, which allows for asymmetric dynamics and quantile-specific unit roots. An empirical exercise with Brazilian data from January 1995 to May 2017 illustrates the method. The results indicate that inflation is globally stationary, but exhibits non-stationary behavior in 28% of the observations. In addition, shocks occurring when inflation is higher seem to have greater dissipation time compared to shocks that occur when inflation is lower.

Keywords: Inflation; Persistence; Quantile autoregression (search for similar items in EconPapers)
JEL-codes: C14 C22 E31 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999317310313
Full text for ScienceDirect subscribers only

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:eee:ecmode:v:73:y:2018:i:c:p:407-430

DOI: 10.1016/j.econmod.2018.04.018

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().