Title

Long-Memory Modeling and Forecasting: Evidence from the US Historical Series of Inflation

Document Type

Article

Publication Date

10-27-2020

Publication Title

Studies in Nonlinear Dynamics and Econometrics

First page number:

1

Last page number:

5

Abstract

We report the results of applying several long-memory models to the historical monthly U.S. inflation rate series and analyze their out-of-sample forecasting performance over different horizons. We find that the time-varying approach to estimating inflation persistence outperforms the models that assume a constant long-memory process. In addition, we examine the link between inflation persistence and exchange rate regimes. Our results support the hypothesis that floating exchange rates associate with increased inflation persistence. This finding, however, is less pronounced during the era of the Great Moderation and the Federal Reserve System’s commitment to inflation targeting.

Keywords

Long-memory; Time varying persistence; Wavelet analysis; Forecasting; U.S. inflation rate

Disciplines

Econometrics | Economics | Social and Behavioral Sciences

Language

English

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