Gregoriou, A. and Kontonikas, A. (2009) Modeling the behaviour of inflation deviations from the target. Economic Modelling, 26(1), pp. 90-95. (doi: 10.1016/j.econmod.2008.05.003)
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Abstract
This study tests for and models non-linearities in inflation deviations from the target in five OECD countries that adopted inflation targeting over the 1990s. Our tests reject the linearity hypothesis and we show that the exponential smooth transition autoregressive (ESTAR) model is capable of capturing the non-linear behavior of inflation misalignments. The extent of inflation deviations from the target varies across the OECD countries, with countries that consistently undershoot the target having a rapid adjustment process, whereas countries that overshoot the target have a slower revision back to equilibrium. Out-of-sample forecasts from the ESTAR model outperform the Markov regime-switching model.
Item Type: | Articles |
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Status: | Published |
Refereed: | Yes |
Glasgow Author(s) Enlighten ID: | Kontonikas, Professor Alexandros |
Authors: | Gregoriou, A., and Kontonikas, A. |
Subjects: | H Social Sciences > HB Economic Theory |
College/School: | College of Social Sciences > Adam Smith Business School > Economics |
Journal Name: | Economic Modelling |
ISSN: | 0264-9993 |
ISSN (Online): | 1873-6122 |
Published Online: | 26 June 2008 |
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