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Detecting multiple breaks in long memory the case of U.S. inflation

Author

Listed:
  • Uwe Hassler
  • Barbara Meller
Abstract
Multiple structural change tests by Bai and Perron (Econometrica 66:47–78, 1998 ) are applied to the regression by Demetrescu et al. (Econ Theory 24:176–215, 2008 ) in order to detect breaks in the order of fractional integration. With this instrument we tackle time-varying inflation persistence as an important issue for monetary policy. We determine not only the location and significance of breaks in persistence, but also the number of breaks. Only one significant break in U.S. inflation persistence (measured by the long-memory parameter) is found to have taken place in 1973, while a second break in 1980 is not significant. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Uwe Hassler & Barbara Meller, 2014. "Detecting multiple breaks in long memory the case of U.S. inflation," Empirical Economics, Springer, vol. 46(2), pages 653-680, March.
    • Handle: RePEc:spr:empeco:v:46:y:2014:i:2:p:653-680
    DOI: 10.1007/s00181-013-0691-8
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    6. Hassler, Uwe & Wolters, Jurgen, 1995. "Long Memory in Inflation Rates: International Evidence," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 37-45, January.
    7. Keiko Yamaguchi, 2011. "Estimating a change point in the long memory parameter," Journal of Time Series Analysis, Wiley Blackwell, vol. 32(3), pages 304-314, May.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Fractional integration; Break in persistence; Unknown break point; Inflation dynamics; C22; E31;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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