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Nonstationarity and nonlinearity in inflation rate: Some further evidence

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  • Arize, Augustine C.
  • Malindretos, John

Abstract

In this study, we investigate the time series properties of the inflation rate in all countries in Africa. In order to gauge whether the inflation rate is nonstationary or stationary, we employ: (i) two linear unit root tests based on different null hypotheses and (ii) nonlinear ESTAR-type unit root tests based on symmetric and asymmetric adjustments toward PPP. In addition, we use two methods to search for common stochastic trends between each African country's inflation rate and the inflation rate of the United States or the United Kingdom. The results provide vast evidence of nonstationarity and cointegration.

Suggested Citation

  • Arize, Augustine C. & Malindretos, John, 2012. "Nonstationarity and nonlinearity in inflation rate: Some further evidence," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 224-234.
    • Handle: RePEc:eee:reveco:v:24:y:2012:i:c:p:224-234
    DOI: 10.1016/j.iref.2012.02.002
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    2. Sajad Ahmad Bhat & Javed Ahmad Bhat, 2021. "Impact of Exchange Rate Changes on the Trade Balance of India: An Asymmetric Nonlinear Cointegration Approach," Foreign Trade Review, , vol. 56(1), pages 71-88, February.
    3. Ahmad, Ahmad Hassan & Aworinde, Olalekan B., 2019. "Are fiscal deficits inflationary in African countries? A new evidence from an asymmetric cointegration analysis," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    4. Devpura, Neluka & Sharma, Susan Sunila & Harischandra, P.K.G. & Pathberiya, Lasitha R.C., 2021. "Is inflation persistent? Evidence from a time-varying unit root model," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    5. Bilgin, Cevat, 2020. "Asymmetric Effects of Exchange Rate Changes on Exports: A Sectoral Nonlinear Cointegration Analysis for Turkey," MPRA Paper 101316, University Library of Munich, Germany.
    6. Shyh-Wei Chen & Chi-Sheng Hsu & Cyun-Jhen Pen, 2016. "Are Inflation Rates Mean-reverting Processes? Evidence from Six Asian Countries," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 12(1), pages 119-155, February.
    7. Canepa, Alessandra, 2022. "Ination Dynamics and Time-Varying Persistence: The Importance of the Uncertainty Channel," Department of Economics and Statistics Cognetti de Martiis. Working Papers 202211, University of Turin.
    8. Arize, Augustine C. & Malindretos, John & Igwe, Emmanuel U., 2017. "Do exchange rate changes improve the trade balance: An asymmetric nonlinear cointegration approach," International Review of Economics & Finance, Elsevier, vol. 49(C), pages 313-326.
    9. Chen, Shyh-Wei & Hsu, Chi-Sheng, 2016. "Threshold, smooth transition and mean reversion in inflation: New evidence from European countries," Economic Modelling, Elsevier, vol. 53(C), pages 23-36.
    10. Sehati , Elham & Mousavi Jahromi , Yeganeh & Mehrara , Mohsen & Najafizadeh , Abbas, 2018. "Non-Linear Inflationary Dynamics based on the Concept of Missing Money in Iran," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 13(2), pages 221-243, April.
    11. Sin, Chor-yiu (CY), 2015. "The economic fundamental and economic policy uncertainty of Mainland China and their impacts on Taiwan and Hong Kong," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 298-311.
    12. Olumuyiwa Tolulope Apanisile & Olusola Mathew Oloba, 2020. "Asymmetric effect of exchange rate changes on cross-border trade in Nigeria," Future Business Journal, Springer, vol. 6(1), pages 1-9, December.
    13. Chu Shiou-Yen & Shane Christopher, 2017. "Using the hybrid Phillips curve with memory to forecast US inflation," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 21(4), pages 1-16, September.
    14. Mahdi Ghodsi & Mohammad Sharif Karimi & Robert Stehrer, 2020. "Does Asymmetric Nonlinear Approach Explain the Relationship Between Exchange Rate and Trade of Iran?," wiiw Working Papers 187, The Vienna Institute for International Economic Studies, wiiw.
    15. Alper YILMAZ, 2024. "Bilateral J-Curve Between Türkiye and Its Major Non-EU Trading Partners: Evidence from Both Linear and Non-Linear Approach," Sosyoekonomi Journal, Sosyoekonomi Society, issue 32(60).
    16. Canepa, Alessandra, 2024. "Inflation dynamics and persistence: The importance of the uncertainty channel," The North American Journal of Economics and Finance, Elsevier, vol. 72(C).

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    More about this item

    Keywords

    Africa; Nonstationality; Cointegration;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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