Inflation Dynamics in the U.S.: Global but Not Local Mean Reversion

Bob Nobay, Ivan Paya () and David Peel

Journal of Money, Credit and Banking, 2010, vol. 42, issue 1, 135-150

Abstract: A stylized fact of U.S. inflation dynamics is one of extreme persistence and possible unit root behavior. If so, the implications for macroeconomics and monetary policy are somewhat unpalatable. Our econometric analysis proposes a parsimonious univariate representation of the inflation process for the last 60 years, the nonlinear exponential smooth autoregressive. The empirical results confirm a number of the key features such as global stationarity, local unit root behavior, and lower persistence in the post-1983 period than in the pre-1983 period. We compare the forecasting ability of our model with that of competing univariate models and find that the nonlinear model outperforms the linear autoregressive model in the pre-1983 period and the random walk in the post-1983 period at short horizons. Copyright (c) 2010 The Ohio State University.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (18)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:mcb:jmoncb:v:42:y:2010:i:1:p:135-150

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().