Persistence, Mean Reversion and Nonlinearities in Inflation Rates of Developed and Developing Countries Using Over One Century of Data

This study examines the inflation persistence using over one century of data for twenty-seven developed and developing countries based on fractional integration techniques incorporating nonlinearity to account for possible structural breaks and inherent asymmetry in the process of inflation. The main results suggest that the degree of persistence, estimated by the long-memory parameter, is that, while there is evidence of long-memory behaviour in the inflation rates of sixteen countries, none of the twenty-seven countries indicate evidence of unit root non-stationarity. The result implies that monetary authorities in these countries can play a role in controlling inflation, though the extent of intervention required will tend to vary.