Analysing Inflation by the ARFIMA Model with Markov-Switching Fractional Differencing Parameter
نویسنده
چکیده
This paper considers the time series properties of the aggregate price level which is well known as one of the most important variables in explaining the macroeconomy. Many studies have been devoted to investigate how aggregate prices respond to shocks. Nelson and Schwert (1977), Barsky (1987), and Ball and Cecchetti (1990) find that inflation contains a unit root. Hassler and Wolters (1995) and Baillie et al. (1996) by contrast show that there exists a mean-reverting long memory in the inflation rates of G7 countries. Because level shifts are likely for inflation, Bos et al. (1999) further examine whether evidence for long memory in ∗Corresponding author. The Institute of Economics, Academia Sinica, Taipei, Taiwan, R.O.C. Tel.: (8862) 2782-2791 ext. 296. Fax: (886-2) 2785-3946. E-Mail: [email protected]
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