Are Inflation Rates Mean-reverting Processes? Evidence from Six Asian Countries

Shyh-Wei Chen (), Chi-Sheng Hsu and Cyun-Jhen Pen
Additional contact information
Shyh-Wei Chen: Department of International Business, Tunghai University, Taiwan
Chi-Sheng Hsu: Department of International Business, Tunghai University, Taiwan
Cyun-Jhen Pen: Department of International Business, Chung Yuan Christian University, Taiwan

Journal of Economics and Management, 2016, vol. 12, issue 1, 119-155

Abstract: This paper tests for the (non)stationarity of inflation in six Asian countries, that is, Indonesia, Malaysia, the Philippines, Thailand, Singapore and India, by considering the possibility of structural breaks and nonlinearity. The results are mixed when a battery of conventional linear unit root tests is used. However, the inflation rate is shown to be a stationary process after considering the structural breaks and nonlinear properties of the threshold and exponential smooth transition. The mean reversion in inflation favors the hypothesis of the natural rate of inflation and the sticky-price model, indicating that any shock has a transitory effect on inflation. The implication of stationary inflation is that any shock has a transitory effect on inflation.

Keywords: inflation; stationarity; structural break; nonlinearity (search for similar items in EconPapers)
JEL-codes: C22 E31 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.jem.org.tw/content/pdf/Vol.12No.1/05.pdf (application/pdf)
http://www.jem.org.tw/content/abstract/Vol.12No.1/English/05.htm (text/html)

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:jec:journl:v:12:y:2016:i:1:p:119-155

Access Statistics for this article

Journal of Economics and Management is currently edited by Cathy W. S. Chen and Shih-Wen Hu

More articles in Journal of Economics and Management from College of Business, Feng Chia University, Taiwan Contact information at EDIRC.
Bibliographic data for series maintained by Yi-Ju Su ().