TY - JOUR

T1 - Identifying Changes in Mean, Seasonality, Persistence and Volatility for G7 and Euro Area Inflation

AU - Bataa, Erdenebat

AU - Osborn, Denise R

AU - Sensier, Marianne

AU - Van Dijk, Dick

PY - 2014/6

Y1 - 2014/6

N2 - We propose an iterative decomposition that tests and accounts for multiple structural breaks in the mean, seasonality, dynamics and conditional volatility, while also accounting for outliers. Considering each component separately within each iteration leads to greater flexibility compared with joint procedures. Monte Carlo analysis shows the procedure performs well. Applied to monthly CPI inflation in G7 countries and the Euro area, we uncover mean and seasonality breaks for all countries and, allowing for these, changes in persistence are generally also indicated. Further, volatility reductions are widespread in the early to mid 1980s, with some countries exhibiting increases from 1999 onwards.

AB - We propose an iterative decomposition that tests and accounts for multiple structural breaks in the mean, seasonality, dynamics and conditional volatility, while also accounting for outliers. Considering each component separately within each iteration leads to greater flexibility compared with joint procedures. Monte Carlo analysis shows the procedure performs well. Applied to monthly CPI inflation in G7 countries and the Euro area, we uncover mean and seasonality breaks for all countries and, allowing for these, changes in persistence are generally also indicated. Further, volatility reductions are widespread in the early to mid 1980s, with some countries exhibiting increases from 1999 onwards.

U2 - 10.1111/obes.12021

DO - 10.1111/obes.12021

M3 - Article

VL - 76

SP - 360

EP - 388

JO - Oxford Bulletin of Economics and Statistics

JF - Oxford Bulletin of Economics and Statistics

SN - 0305-9049

IS - 3

ER -