Inflation persistence in BRICS countries: A quantile autoregressive (QAR) model

Phiri, Andrew (2017): Inflation persistence in BRICS countries: A quantile autoregressive (QAR) model.

Abstract

Using the recently-introduced quantile autoregression methodology (QAR), this study contributes to the ever-expanding empirical literature by investigating the persistence in inflation for BRICS countries using quarterly time series data collected between 1996 to 2016. Our empirical analysis reveals two crucial findings. Firstly, for all estimated regressions, persistence in moderate to high inflation rates in the QAR regression exhibits unit root tendencies. Secondly, we note that inflation persistence varies across different time horizons corresponding to periods priori and subsequent to the global financial crisis. These findings have important implications for Central Banks in BRICs countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: BRICS; Emerging economies; Inflation persistence; Quantile regression.
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C31 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions ; Social Interaction Models; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation

References

Amano R. (2007), “Inflation persistence and monetary policy: A simple result”, Economic Letters, 94(1), 26-31.

Antonakakis N., Cunado J., Gil-Alana L. and Gupta R. (2016), “Is inflation persistence different in reality?”, Economic Letters, 148, 55-58.

Balcilar M., Gupta R. and Jooste C. (2016), “Analysing South Africa’s inflation persistence using an ARFIMA model with Markov-switching fractional differencing parameter”, The Journal of Developing Areas, 50(1), 47-57.

Batini N. (2006), “Euro area inflation persistence”, Empirical Economics, 31(4), 977-1002.

Benoit D. and Van der Poel D. (2009), “Benefits of quantile regression for the analysis of customer lifetime in a contractual setting: An application in financial services”, Exert Systems with Applications, 36, 10475-01484.

Canarella G. and Miller S. (2015), “Inflation persistence and structural breaks: The experience of inflation targeting countries and the USA”, Journal of Economics Studies, 43(6), 980-1005.

Cioran Z. (2014), “Monetary policy, inflation and the causal relation between the inflation rate and some of the macroeconomic variables”, Procedia Economics and Finance, 16, 391-401.

Colucci D. and Valori V. (2015), “Stabilizing inflation in a simple monetary policy model with heterogeneous agents”, Mathematics and Computers in Simulation, 108, 233-244.

Cuestas J. and Harrison B. (2010), “Inflation persistence and nonlinearities in Central and Eastern European countries”, Economic Letters, 106, 81-83.

Cukierman A. (2017), “Money growth and inflation: Policy lessons from a comparison of the UK since 2008 with hyperinflation Germany in the 1920s”, Economic Letters, 154, 109-112.

Gadzinski G. and Orlandi F. (2004), “Inflation persistence in the European Union, the Euro area and the United States”, ECB Working Paper Series No. 414, November.

Gaffeo E. and Canzian G. (2011), “The psychology of inflation, monetary policy and macroeconomic instability”, The Journal of Socio-Economics, 40(5), 660-670.

Gerlach S. and Tillman P. (2012), “Inflation targeting and inflation persistence in Asia-Pacific”, Journal of Asian Economies, 23(4), 360-373.

Gil-Alana L. (2011), “Inflation in South Africa: A long memory approach”, Economics Letters, 111(3), 207-209.

Gil-Alana L., Mervar A. and Payne J. (2016), “The stationarity of inflation in Croatia: Anti-inflation stabilization program and the change in persistence”, Economic Change and Restructuring, 50(1), 45-58

Gupta R., Jooste C. and Ranjbar O. (2017), “South Africa’s inflation persistence: A quantile regression framework”, Economic Change and Restructuring, (forthcoming).

Khadaroo A. (2005), “A threshold in inflation dynamics: Evidence from emerging countries”, Applied Economics, 37(6), 719-723.

Koenker R. and Bassett G. (1978), “Regression Quantiles”, Econometrica, 46(1), 33-50.

Koenker R. and Hallock K. (2001), “Quantile regression”, Journal of Economic Perspectives, 15(4), 143-156.

Koenker R. and Xiao Z. (2006), “Quantile autoregression”, Journal of American Statistical Association, 101(475), 980-1006.

Manzan S. and Zerom D. (2015), “Asymmetric quantile persistence and predictability: The case of the US inflation”, Oxford Bulletin of Economics and Statistics, 77(2), 297-318.

Moore B. (2014), “Monetary policy regimes and inflation in the new-Keynesian model”, Journal of Macroeconomics, 40, 323-337.

Mourelle E., Cuestas J. and Gil-Alana L. (2011), “Is there an asymmetric behaviour in African inflation? A nonlinear approach”, South African Journal of Economics, 79(1), 68-90.

Phiri A. (2012), “Threshold effects and inflation persistence in South Africa”, Journal of Financial Economic Policy, 4(3), 247-269.

Phiri A. (2016), “Inflation persistence in African countries: Does inflation targeting matter”, Economics and Business Letters, 5(3), 65-71.

Phiri A. (2017), “Changes in inflation persistence prior and subsequent to the subprime crisis: What are the implications for South Africa?”, Journal of Reviews in Global Economics, 6, 198-207.

Rangasamy L. (2009), “Inflation persistence and core inflation: The case of South Africa”, South African Journal of Economics, 77(3), 430-444.

Tsong C. and Lee C. (2011), “Asymmetric inflation dynamics: Evidence from quantile regression analysis”, Journal of Macroeconomics, 33(4), 668-680.

Wolters M. and Tillman P. (2015), “The changing dynamics of US inflation persistence: A quantile regression approach”, Studies in Nonlinear Dynamics and Econometrics, 19(2), 161-182.