Detecting multiple breaks in long memory the case of U.S. inflation

Uwe Hassler and Barbara Meller ()

Empirical Economics, 2014, vol. 46, issue 2, 653-680

Abstract: Multiple structural change tests by Bai and Perron (Econometrica 66:47–78, 1998 ) are applied to the regression by Demetrescu et al. (Econ Theory 24:176–215, 2008 ) in order to detect breaks in the order of fractional integration. With this instrument we tackle time-varying inflation persistence as an important issue for monetary policy. We determine not only the location and significance of breaks in persistence, but also the number of breaks. Only one significant break in U.S. inflation persistence (measured by the long-memory parameter) is found to have taken place in 1973, while a second break in 1980 is not significant. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Fractional integration; Break in persistence; Unknown break point; Inflation dynamics; C22; E31 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Detecting multiple breaks in long memory: The case of US inflation (2011)
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DOI: 10.1007/s00181-013-0691-8

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