When a central bank commits credibly to a nonaccommodative monetary policy, observed inflation should be a stationary process. In countries where, for a variety of reasons, the determinants of inflation could lead it to follow a nonstationary process, the adoption of a credible disinflationary programme should therefore induce a fundamental change in the stochastic process governing inflation and, in particular, should diminish its persistence. This article studies the time-series properties of both inflation and core inflation during the 1995-2006 period for the Mexican economy, using recently developed techniques to detect a change in the persistence of economic time series. Consistently with the adoption of an inflation-targeting framework, the results suggest that inflation in Mexico seems to have indeed switched from a nonstationary to a stationary process around the end of year 2000 or the beginning of 2001.
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Document Type: Research Article
Direccion General de Investigacion Economica, Banco de Mexico, Mexico
Direccion General de Investigacion Economica, Banco de Mexico, Mexico,Escuela de Economia, Universidad de Guanajuato, Banco de Mexico, Mexico
Publication date: 2010-09-01
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