Intrinsic Inflation Persistence in a Developing Country

Muhammad Hanif, Muhammad Jahanzeb Malik () and Javed Iqbal

No 52, SBP Working Paper Series from State Bank of Pakistan, Research Department

Abstract: This study estimates degree of intrinsic inflation persistence in Pakistan using aggregate price index, group level price indices, and individual commodity prices. We find no evidence of a unit root in (MoM) inflation at any level, except for house rent. Using monthly data from 1959 to 2011 we find that the estimate of (overall) inflation persistence is 0.16, which is low but significant. During 2001-2011 (overall) inflation persistence is insignificant. Food inflation does not exhibit any persistence during the last decade. However, the degree of persistence is very high (0.80) and significant for core inflation (NFNE), which weakens slightly (to 0.69) when we account for commodities price shock of 2008. At micro level, the estimated degree of inflation persistence for various groups is found to be relatively higher, in almost 60 percent of the cases, compared to corresponding degree of persistence at aggregate level. This may be because in micro analysis we consider only those commodities for which the estimated degree of inflation persistence is significant.

Keywords: Persistence; inflation; food inflation; core inflation (search for similar items in EconPapers)
JEL-codes: C81 D01 E31 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2012-06
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: Intrinsic Inflation Persistence in a Developing Country (2016)
Working Paper: Intrinsic Inflation Persistence in a Developing Country (2012)
Working Paper: Intrinsic Inflation Persistence in a Developing Country (2012)
Working Paper: Intrinsic Inflation Persistence in a Developing Country (2012)
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