Dual long memory of inflation and test of the relationship between inflation and inflation uncertainty

Jinquan Liu (), Tingguo Zheng () and Jianli Sui ()
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Jinquan Liu: Quantitative Research Center of Economics, Jilin University, Changchun 130021, China
Tingguo Zheng: Quantitative Research Center of Economics, Jilin University, Changchun 130021, China
Jianli Sui: Quantitative Research Center of Economics, Jilin University, Changchun 130021, China

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2008, vol. 3, issue 2, 240-254

Abstract: This paper uses the ARFIMA-FIGARCH model to investigate the China¡¯s monthly inflation rate from January 1983 to October 2005. It is found that both first moment and second moment of inflation have remarkable long memory, indicating the existence of long memory properties in both inflation level and inflation uncertainty. By the Granger-causality test on inflation rate and inflation uncertainty, it is shown that the inflation level affects the inflation uncertainty and so supports Friedman hypothesis. Therefore, as for policy maker, they should roundly concerns on long memory properties of inflation and inflation uncertainty, and their single-direction relationship between them.

Keywords: long memory; inflation rate; inflation uncertainty; ARFIMA-FIGARCH (search for similar items in EconPapers)
JEL-codes: C22 E31 (search for similar items in EconPapers)
Date: 2008
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