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