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Long memory and structural breaks in hyperinflation countries

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Abstract

In this paper we examine the stochastic behavior of prices in hyperinflation countries by using a fractional integration test (Robinson 1994) that lends itself to incorporating structural breaks into the model. We focus on Argentina, Brazil, and Israel and find that when allowing for structural breaks, in the form of slope dummies (or squared slope dummies), the order of integration of the series decreases considerably. Especially in the case of Brazil, the degree of persistence of inflation seems to be less substantial than estimated in other studies, which might be interpreted as evidence against “heterodox” inflation stabilization. (JEL C22, E31)

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Authors and Affiliations

  1. Centre for Monetary and Financial Economics, South Bank University, 103 Borough Road, SE1 0AA, London, UK

    Guglielmo Maria Caporale

  2. Department of Economics, University of Navarre, Navarre, USA

    Luis A. Gil-Alana

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  1. Guglielmo Maria Caporale
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  2. Luis A. Gil-Alana
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Correspondence to Guglielmo Maria Caporale.

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Caporale, G.M., Gil-Alana, L.A. Long memory and structural breaks in hyperinflation countries. J Econ Finan 27, 136–152 (2003). https://doi.org/10.1007/BF02827215

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