Skip to main content
SpringerLink
Log in

Iranian inflation: peristence and structural breaks

  • Published:
Journal of Economics and Finance Aims and scope Submit manuscript

Abstract

This paper investigates the behavior of the inflation rate in Iran for the time period 1992–2017 using fractional integration. The results indicate an extremely large degree of persistence in the series, with an order of integration of about 2. The consequences of such a degree of dependence are examined in the paper along with some suggestions to reduce it in the future.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3

Similar content being viewed by others

Notes

  1. An I(0) process is defined in the paper as a covariance stationary process where the infinite sum of the autocovariances is finite. It includes thus the white noise case but also stationary ARMA structures.

  2. The methods employed here are based on the Whittle function in the frequency domain (Dahlhaus 1989) using a procedure developed by Robinson (1994) that remains valid even in nonstationary (d ≥ 0.5) contexts.

  3. The choice of the optimal bandwidth number is still an unresolved issue in most semiparametric estimation methods with fractional integration. It indicates the trade-off between bias and variance.

  4. Based of on the nonstationary nature of the data, the estimates were based on the second differenced data, adding then the value 2 to the estimated values.

References

  • Abasinejad H, Goodarzy Y (2014) Estimating inflation in Iran. J Econ Bus 52:1–26

    Google Scholar 

  • Amano R (2007) Inflation persistence and monetary policy: a simple result. Econ Lett 94:26–31

    Article  Google Scholar 

  • Antonakakis N, Cunado J, Gil-Alana LA, Gupta R (2016) Is inflation persistence different in reality? Econ Lett 148(C:55–58

    Article  Google Scholar 

  • Aziznejad S, Komijani A (2017) Inflation and exchange rate in Iran. J Econ Res 17(1):121–143

    Google Scholar 

  • Baillie RT (1996) Long memory processes and fractional integration in econometrics. J Econ 73:5–59

    Article  Google Scholar 

  • Baillie RT, Kapetanios G (2007) Testing for neglected nonlinearity in long-memory models. J Bus Econ Stat 25(4):447–461

    Article  Google Scholar 

  • Balcilar, M. (2003). Long Memory and Structural Breaks in Turkish Inflation Rates. VI. National Econometrics and Statistics Symposium, 1–13

  • Barros C, Gil-Alana LA (2013) Inflation forecasting in Angola: a fractional approach. Afr Dev Rev 25(1):91–104

    Article  Google Scholar 

  • Berkchian, S, Biat, S and Karami, H. (2014). Controlling the unstable impact of inflation, Tehran, College of Money and Banking Research no 9311

  • Bloomfield P (1973) An exponential model in the spectrum of a scalar time series. Biometrika 60:217–226

    Article  Google Scholar 

  • Bos CS, Franses PH, Ooms M (1999) Long memory and level shifts: re-analyzing inflation rates. Empir Econ 24(3):427–449

    Article  Google Scholar 

  • Bos CS, Franses PH, Ooms M (2002) Inflation, forecast intervals and long memory regression models. Int J Forecast 18:243–264

    Article  Google Scholar 

  • Bos, C.S., Koopman, S.J., and Ooms, M. (2007). Long memory modelling of inflation with stochastic variance and structural breaks, Tinbergen Institute Discussion Papers

  • Canarella, G., Gil-Alana, L.A., Gupta, R., and Miller, S.M. (2016). Modeling U.S. historical time-series prices and inflation using various linear and nonlinear long-memory approaches, Working Papers 201683, University of Pretoria, Department of Economics

  • Carcel, H., Gil-Alana, L.A and Madigu, G. (2016). Currency Union in the East African Community: a fractional integration appoach, advances in African economic, social and political development (Book: Heshmati, A, 2016, economic integration, currency union, and sustainable and inclusive growth in East Africa), Chapter 3: 41–54

  • CBI (2017), Economic report Tehran, Central Bank of Iran

  • Cuestas JC, Gil-Alana LA (2016) A non-linear approach with long range dependence based on Chebyshev polynomials. Stud Nonlinear Dyn E 20(1):57–74

    Google Scholar 

  • Cuestas JC, Harrison B (2010) Inflation persistence and nonlinearities in central and eastern European countries. Econ Lett 106:81–83

    Article  Google Scholar 

  • Dadgar Y, Nazari R (2010) Analyzing the welfare statues of subsidy policy in Iran. J Soc Welf 11(42):149–171

    Google Scholar 

  • Dadgar Y, Keshavarz H, Tiatoraj A (2007) Inflation rate and economic growth in Iran. J Econ Stud 5:5–31

    Google Scholar 

  • Dahlhaus R (1989) Efficient parameter estimation for self-similar process. Ann Stat 17:1749–1766

    Article  Google Scholar 

  • Delgado MA, Robinson PM (1994) New methods for the analysis of long-memory time series: application to Spanish inflation. J Forecast 13:97–107

    Article  Google Scholar 

  • Diebold FX, Rudebusch GD (1989) Long memory and persistence in aggregate output. J Monet Econ 24:189–209

    Article  Google Scholar 

  • Franses PH, Ooms M (1997) A periodic long memory model for quarterly UK inflation. Int J Forecast 13(1):117–126

    Article  Google Scholar 

  • Gadea MD, Sabaté M, Serrano JM (2004) Structural breaks and their trace in the memory: inflation rate series in the long-run. J Int Financ Mark Inst Money 14(2):117–134

    Article  Google Scholar 

  • Gil-Alana LA (2004) The use of the Bloomfield (1973) model as an approximation of ARMA processes in the context of fractional integration. Math Comput Model 39:429–436

    Article  Google Scholar 

  • Gil-Alana LA, Barros C, Faria JR (2014) Inflation in Mozambique: empirical facts based on persistence, seasonality and breaks. Appl Econ 46(21):2545–2555

    Article  Google Scholar 

  • Gil-Alana LA, Mervar A, Payne JE (2017) The stationarity of inflation in Croatia: anti-inflation stabilization program and the change in persistence. Econ Chang Restruct 50(1):45–58

    Article  Google Scholar 

  • Hamming, R.W. (1973). Numerical methods for scientists and engineers. McGraw-Hill, Dover

  • Hassler U, Wolters J (1995) Long memory in inflation rates: international evidence. J Bus Econ Stat 13:37–45

    Google Scholar 

  • Hsu CC (2005) Long memory or structural changes: an empirical examination on inflation rates. Econ Lett 88(2):289–294

    Article  Google Scholar 

  • Kouretas GP, Wohar ME (2012) The dynamics of inflation: a study of a large number of countries. Appl Econ 44(16):2001–2026

    Article  Google Scholar 

  • Kumar MS, Okimoto T (2007) Dynamics of persistence in international inflation rates. J Money Credit Bank 39(6):1457–1479

    Article  Google Scholar 

  • Levin AT, Williams JC (2003) Robust monetary policy with competing reference models. J Monet Econ 50:945–975

    Article  Google Scholar 

  • Marzban H, Nejati M (2009) Structural break in inflation stability in Iran. J Econ Model 8(Spring):74–91

    Google Scholar 

  • Mehr Ara M, Sofiani M (2016) The impact of nominal variables on inflation rate in Iran. J Econ Model 3(7):25–54

    Google Scholar 

  • Morana C (2002) Common persistent factors in inflation and excess nominal money growth and a new measure of core inflation. Stud Nonlinear Dyn E 6(3):1–40

    Google Scholar 

  • Rinke, S; Busch, M and Leschinski, C. (2017). Long memory, breaks, and trends: on the sources of persistence in inflation rates, Hannover Economic Papers (HEP), No. 584

  • Robinson PM (1994) Efficient tests of nonstationary hypotheses. J Am Stat Assoc 89:1420–1437

    Article  Google Scholar 

  • Robinson PM (1995) Gaussian semi-parametric estimation of long range dependence. Ann Stat 23:1630–1661

    Article  Google Scholar 

  • Rudebusch GD (2002) Assessing nominal income rules for monetary policy with model and data uncertainty. Econ J 112:402–432

    Article  Google Scholar 

  • Smyth GK (1998) Polynomial aproximation. Wiley, Chichester 1998

    Google Scholar 

  • Tehranchian A, Samimi A, Baloonejad R (2013) Testing stability of inflation in Iran. J Econ Growth Dev 11(spring):19–28

    Google Scholar 

Download references

Acknowledgements

Prof. Luis A. Gil-Alana gratefully acknowledges financial support from the Ministerio de Economía y Competitividad (ECO2017–55236). Comments from the Editor and an anonymous reviewer is gratefully acknowledged.

Author information

Authors and Affiliations

  1. Faculty of Economics and ICS, University of Navarra, Pamplona, E31009, Spain

    Luis A. Gil-Alana

  2. Economics Department, Beheshty University, Tehran, Iran

    Yadollah Dadgar

  3. Ferdowsi University, Mashhad, Iran

    Rouhollah Nazari

Authors
  1. Luis A. Gil-Alana
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Yadollah Dadgar
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Rouhollah Nazari
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Yadollah Dadgar.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Gil-Alana, L.A., Dadgar, Y. & Nazari, R. Iranian inflation: peristence and structural breaks. J Econ Finan 43, 398–408 (2019). https://doi.org/10.1007/s12197-018-9446-x

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s12197-018-9446-x

Keywords

JEL Classification

Search

Navigation