Abstract
The current study takes place in a univariate context and we seek to determine an econometric model leading to best characterize the U.S. inflation rate dynamic. In order to achieve this, three types of specifications, associated with three possible evolutions of the expected rate are considered. The first allows an overall instability of the trend or the expected inflation rate. The second considers an alternative specification in which the expected inflation rate is unstable in periodic segments of the sample. Finally, the last specification allows instability of a “mixed” type in which the trend inflation rate is assumed to be random or subject to a probability schema. The results of our study indicate that this last specification is the one that gives the most adequate characterization of the inflation rate dynamic. The inflation rate thus appears generated by a second order autoregressive process with, on the one hand, unchanging lag coefficients and, on the other, a unconditional mean which switches between three globals different frequency regimes of accession.
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Boutahar, M., Gbaguidi, D. Which Econometric Specification to Characterize the U.S. Inflation Rate Process?. Comput Econ 34, 145–172 (2009). https://doi.org/10.1007/s10614-009-9168-4
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DOI: https://doi.org/10.1007/s10614-009-9168-4