Identifying Changes in Mean, Seasonality, Persistence and Volatility for G7 and Euro Area Inflation
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In: Oxford Bulletin of Economics and Statistics, Vol. 76, No. 3, 06.2014, p. 360-388.
Research output: Contribution to journal › Article › peer-review
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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 -