On the Persistence of UK Inflation: A Long-Range Dependence Approach

Guglielmo Maria Caporale, Luis Gil-Alana and Tommaso Trani

No 6968, CESifo Working Paper Series from CESifo

Abstract: This paper examines the degree of persistence in UK inflation by applying long-memory methods to historical data that span the period from 1660 to 2016. Specifically, we use both parametric and non-parametric fractional integration techniques, that are more general than those based on the classical I(0) vs. I(1) dichotomy. Further, we carry out break tests to detect any shifts in the degree of persistence, and also run rolling-window and recursive regressions to investigate its evolution over time. On the whole, the evidence suggests that the degree of persistence of UK inflation has been relatively stable following the Bretton Woods period, despite the adoption of different monetary regimes. The estimation of an unobserved-components stochastic volatility model sheds further light on the issues of interest by showing that post-Bretton Woods changes in UK inflation are attributable to a fall in the volatility of permanent shocks.

Keywords: UK inflation; persistence; fractional integration (search for similar items in EconPapers)
JEL-codes: C14 C22 E31 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-cba, nep-eec, nep-his, nep-mac, nep-mon and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: On the persistence of UK inflation: A long‐range dependence approach (2022)
Working Paper: On the Persistence of UK Inflation: A Long-Range Dependence Approach (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_6968

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