Which is the best model for the US inflation rate: a structural changes model or a long memory process

Dominique Guegan () and Lanouar Charfeddine
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Dominique Guegan: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper analyzes the dynamics of the US inflation series using two classes of models : structural changes models and Long memory processes. For the first class, we use the Markov Switching (MS-AR) model of Hamilton (1989) and the Structural Change (SCH-AR) model using the sequential method proposed by Bai and Perron (1998, 2003). For the second class, we use the ARFIMA process developed by Granger and Joyeux (1980). Moreover, we investigate whether the observed long memory behavior is a true behavior or a spurious behavior created by the presence of breaks in time series. Our empirical results provide evidence for changes in mean, breaks dates coincide exactly with some economic and financial events such Vietnam War and the two oil price shocks. Moreover, we show that the observed long memory behavior is spurious and is due to the presence of breaks in data set.

Keywords: Structural breaks models; long range dependance; inflation series (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (6)

Published in Journal of Applied Econometrics, 2015, A paraître

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Related works:
Working Paper: Which is the best model for the US inflation rate: a structural changes model or a long memory process (2015)
Journal Article: Which is the Best Model for the US Inflation Rate: A Structural Change Model or a Long Memory Process? (2011)
Working Paper: Which is the best model for the US inflation rate: a structural changes model or a long memory process? (2007)
Working Paper: Which is the best model for the US inflation rate: a structural changes model or a long memory process? (2007)
Working Paper: Which is the best model for the US inflation rate: a structural changes model or a long memory process? (2007)
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