INFLATION TARGETING AND THE STATIONARITY OF INFLATION: NEW RESULTS FROM AN ESTAR UNIT ROOT TEST

Andros Gregoriou A · Alexandros Kontonikas

38 citations0/0 files storedBulletin of Economic Research

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Monetary Policy and Economic Impact Market Dynamics and Volatility Economic theories and models

Abstract

In this paper, we examine the time series properties of inflation in seven countries that have adopted inflation targeting. Unlike previous studies, we utilize a non-linear mean reverting adjustment mechanism for inflation and we discover that, although deviations of inflation from the target can exhibit a region of non-stationary behaviour, overall they are stationary indicating successful targeting implementation.

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References

1988Testing for a Unit Root in Time Series Regression 1993Discretion versus policy rules in practice 1996Efficient Tests for an Autoregressive Unit Root 1992Efficient Tests for an Autoregressive Unit Root 2001LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power 1987Time Series Regression with a Unit Root 2002Testing for a unit root in the nonlinear STAR framework 1992Characterizing nonlinearities in business cycles using smooth transition autoregressive models

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2017Inflation targeting and inflation persistence: New evidence from fractional integration and cointegration 2009The long-run relationship between stock prices and goods prices: New evidence from panel cointegration 2015Asymmetric Behaviour of Inflation around the Target in Inflation‐Targeting Countries 2008Modeling the behaviour of inflation deviations from the target 2011Euro Area Inflation Differentials: Unit Roots and Nonlinear Adjustment

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