A time-series approach to test a change in inflation persistence: the Mexican experience

Daniel Chiquiar, Antonio Noriega () and Manuel Ramos-Francia
Authors registered in the RePEc Author Service: Manuel Ramos Francia

Applied Economics, 2010, vol. 42, issue 24, 3067-3075

Abstract: When a central bank commits credibly to a nonaccommodative monetary policy, observed inflation should be a stationary process. In countries where, for a variety of reasons, the determinants of inflation could lead it to follow a nonstationary process, the adoption of a credible disinflationary programme should therefore induce a fundamental change in the stochastic process governing inflation and, in particular, should diminish its persistence. This article studies the time-series properties of both inflation and core inflation during the 1995-2006 period for the Mexican economy, using recently developed techniques to detect a change in the persistence of economic time series. Consistently with the adoption of an inflation-targeting framework, the results suggest that inflation in Mexico seems to have indeed switched from a nonstationary to a stationary process around the end of year 2000 or the beginning of 2001.

Date: 2010
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Working Paper: A Time Series Approach to Test a Change in Inflation Persistence: The Mexican Experience (2007)
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DOI: 10.1080/00036840801982684

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