US Inflation Dynamics on Long Range Data
Vasilios Plakandaras (),
Periklis Gogas (),
Rangan Gupta () and
Theophilos Papadimitriou ()
No 201452, Working Papers from University of Pretoria, Department of Economics
In this paper we evaluate inflation persistence in the U.S. using long range monthly and annual data. The importance of inflation persistence is crucial to policy authorities and market participants, since the level of inflation persistence provides an indication on the susceptibility of the economy to exogenous shocks. Departing from classic econometric approaches found in the relevant literature, we evaluate persistence through the nonparametric Hurst exponent within both a global and a rolling window framework. Moreover, we expand our analysis to detect the potential existence of chaos in the data generating process, in order to enhance the robustness of conclusions. Overall, we find that inflation persistence is high from 1775 to 2013 for the annual dataset and from February 1876 to May 2014 in monthly frequency, respectively. Especially from the monthly dataset, the rolling window approach allows us to derive that inflation persistence has reached to historically high levels in the post Bretton Woods period and remained there ever since.
Keywords: Inflation; Persistence; Hurst exponent; Detrended Fluctuation Analysis; Lyapunov exponent (search for similar items in EconPapers)
JEL-codes: E31 E60 C14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Journal Article: US inflation dynamics on long-range data (2015)
Working Paper: US inflation dynamics on long range data (2015)
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