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Is there a unit root in the inflation rate? New evidence from panel data models with multiple structural breaks

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In this article, we examine whether or not the inflation rate for 17 OECD countries can be modelled as a stationary process. We find that (1) conventional univariate unit root tests without any structural breaks generally reveal that the inflation rate contains a unit root; (2) the KPSS univariate test with multiple structural breaks reveals that for 10 out of 17 countries inflation is stationary; and (3) the KPSS panel unit root test reveals strong evidence for stationarity of the inflation rate for panels consisting of countries which were declared nonstationary by univariate tests.
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Document Type: Research Article

Affiliations: 1: School of Accounting Economics and Finance, Faculty of Business and Law, Deakin University, Melbourne, Australia 2: School of Economics, Finance and Marketing, Royal Melbourne Institute of Technology, Melbourne, Australia

Publication date: 2010-05-01

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