Modeling The Non-Linear Behaviour of Inflation Deviations From The Target

Andros Gregoriou () and Alexandros Kontonikas ()

Working Papers from Business School - Economics, University of Glasgow

Abstract: This study tests for and models non-linearities in inflation deviations from the target in five OECD countries that adopted inflation targeting over the 1990s. Our tests reject the linearity hypothesis and we show that the exponential smooth transition autoregressive (ESTAR) model is capable of capturing the non-linear behavior ofinflation misalignments. The extent of inflation deviations from the target varies across the OECD countries, with countries that consistently undershoot the target having a rapid adjustment process, whereas countries that overshoot the target have a slower revision back to equilibrium.

JEL-codes: C5 E31 E52 (search for similar items in EconPapers)
Date: 2005-09
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2005_12

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