Are Shocks to Inflation Rates Permanent or Temporary? New Evidence from a Panel SURADF Approach

In this study, we test the property of nonstationary in regard to the inflation rate for 15 OECD countries using the newly-developed Panel SURADF tests of Breuer et al. (2001) for the period 1971-2004. While other Panel-based unit root tests are joint tests of a unit root for all members of the panel and are incapable of determining the mix of the 1(0) and 1(1) series in the panel setting, the Panel SURADF approach tests a separate unit-root null hypothesis for each individual panel member and, therefore identifies how many and which series in the panel are stationary processes. The property of nonstationary is confirmed for only four of the 15 countries when Breuer et al. 's Panel SURADF tests are conducted.