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Revisiting inflation in the euro area allowing for long memory

Javier Hualde and Fabrizio Iacone ()

Economics Letters, 2017, vol. 156, issue C, 145-150

Abstract: We analyse inflation and inflation differentials in the euro area allowing for long memory and a new type of limiting theory denoted fixed-bandwidth. Our results differ from those based on standard normal asymptotics and the short memory assumption, and we also find that the inflation differentials between “core” and “peripheral” countries are strongly persistent. “Core” economies appear to have less persistent differentials and may be more integrated, while “peripheral” countries with high inflation may find themselves under competitive pressure for a long time.

Keywords: Inflation persistence; Inflation differentials; Euro area; Fractional integration and cointegration (search for similar items in EconPapers)
JEL-codes: C32 E31 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:ecolet:v:156:y:2017:i:c:p:145-150