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Dual long memory of inflation and test of the relationship between inflation and inflation uncertainty

Author

Listed:
  • LIU Jinquan

    (Quantitative Research Center of Economics, Jilin University, Changchun 130021, China)

  • ZHENG Tingguo

    (Quantitative Research Center of Economics, Jilin University, Changchun 130021, China)

  • SUI Jianli

    (Quantitative Research Center of Economics, Jilin University, Changchun 130021, China)

Abstract

This paper uses the ARFIMA-FIGARCH model to investigate the China¡¯s monthly inflation rate from January 1983 to October 2005. It is found that both first moment and second moment of inflation have remarkable long memory, indicating the existence of long memory properties in both inflation level and inflation uncertainty. By the Granger-causality test on inflation rate and inflation uncertainty, it is shown that the inflation level affects the inflation uncertainty and so supports Friedman hypothesis. Therefore, as for policy maker, they should roundly concerns on long memory properties of inflation and inflation uncertainty, and their single-direction relationship between them.

Suggested Citation

  • LIU Jinquan & ZHENG Tingguo & SUI Jianli, 2008. "Dual long memory of inflation and test of the relationship between inflation and inflation uncertainty," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 3(2), pages 240-254, June.
    • Handle: RePEc:fec:journl:v:3:y:2008:i:2:p:240-254
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-008-0011-y
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    More about this item

    Keywords

    long memory; inflation rate; inflation uncertainty; ARFIMA-FIGARCH;
    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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