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On the dynamics of inflation persistence around the world

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Abstract

We study the dynamics of inflation persistence in 45 countries for the period 1960–2008 using a recently developed test for multiple changes in persistence, which decomposes the sample information between adjacent I (0) and I (1) periods. We find that: (i) inflation persistence and average inflation tend to fall and rise at the same time; (ii) in some countries there are changes in the level of inflation which do not seem to be related to changes in inflation persistence; (iii) around half of the countries analyzed do not present any burst of I (1) behavior, and hence have stationary inflation throughout; (iv) for the other half, we detect switches of the type I (0) − I (1) − I (0), hence, inflation persistence, when it has occurred, has been temporal; and, (v) for about half of the countries in which inflation has presented I (1) behavior, persistent inflation lasted more than a decade. In addition, we find that in the last 50 years there have been mainly two episodes where long bursts of I (1) inflation took place simultaneously among groups of countries. In general, the “Great Inflation” occurred during the seventies and eighties in advanced economies, whereas it occurred during the eighties and nineties in emerging economies, particularly in Latin America.

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Authors and Affiliations

  1. Dirección General de Investigación Económica, Banco de México, Mexico City, México

    Antonio E. Noriega

  2. Departamento de Economía y Finanzas, Universidad de Guanajuato, Guanajuato, México

    Antonio E. Noriega

  3. Bank of America Merrill Lynch, Mexico City, México

    Carlos Capistrán

  4. Banco de México, Mexico City, México

    Manuel Ramos-Francia

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  1. Antonio E. Noriega
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  2. Carlos Capistrán
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  3. Manuel Ramos-Francia
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Correspondence to Antonio E. Noriega.

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Noriega, A.E., Capistrán, C. & Ramos-Francia, M. On the dynamics of inflation persistence around the world. Empir Econ 44, 1243–1265 (2013). https://doi.org/10.1007/s00181-012-0575-3

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  • DOI: https://doi.org/10.1007/s00181-012-0575-3

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