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Inflation stationarity during Latin American inflation: insights from unit root and structural break analysis

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  • Tony Caporale
  • Julia Paxton

Abstract

Inflation stationarity has important theoretical and policy implications, yet most of the literature has focused on low inflation countries. This article investigates inflation stationarity in Brazil, Argentina, Chile, Mexico and Bolivia during a hyperinflationary period from 1980 to 2004. We test for structural breaks in inflation, discuss the breaks in terms of changes in monetary regimes, and test if accounting for these structural breaks changes the nonstationarity results for those nations that ‘fail’ the traditional Augmented Dickey--Fuller (ADF) test for inflation. All five are found to have inflation rates that are I (0) once the structural breaks analysis is incorporated into our unit root tests.

Suggested Citation

  • Tony Caporale & Julia Paxton, 2013. "Inflation stationarity during Latin American inflation: insights from unit root and structural break analysis," Applied Economics, Taylor & Francis Journals, vol. 45(15), pages 2001-2010, May.
    • Handle: RePEc:taf:applec:45:y:2013:i:15:p:2001-2010
    DOI: 10.1080/00036846.2011.646067
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    References listed on IDEAS

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    1. Laurence Ball, 1993. "The Dynamics of High Inflation," NBER Working Papers 4578, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Imran H. Shah & Ian Corrick & Abdul Saboor, 2018. "How should Central Banks Respond to Non-neutral Inflation Expectations?," Open Economies Review, Springer, vol. 29(2), pages 321-351, April.
    2. Luis A. Gil-Alana & Andrea Mervar & James E. Payne, 2017. "The stationarity of inflation in Croatia: anti-inflation stabilization program and the change in persistence," Economic Change and Restructuring, Springer, vol. 50(1), pages 45-58, February.
    3. Cuneyt Dumrul & Yasemin Dumrul, 2015. "Price-Money Relationship after Infl ation Targeting: Co-integration Test with Structural Breaks for Turkey and Brazil," International Journal of Economics and Financial Issues, Econjournals, vol. 5(3), pages 701-708.
    4. Angelica-Nicoleta Neculaesei (Onea), 2017. "Cultural Stereotypes – A Revival Of Bosche’ S View," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 20, pages 205-218, December.
    5. Uäžur Sivri, 2017. "Is Inflation Rate Of Turkey Stationary? Evidence From Unit Root Tests With And Without Structural Breaks," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 20, pages 29-52, December.

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