Title

Long Memory Modeling and Forecasting: Evidence from the U.S. Historical Series of Inflation

Document Type

Article

Publication Date

10-27-2020

Publication Title

Studies in Economic Dynamics and Econometrics

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 findthat the time-varying approach to estimating inflation persistence outperforms the models that assume aconstant long-memory process. In addition, we examine the link between inflation persistence and exchangerate regimes. Our results support the hypothesis that floating exchange rates associate with increased inflationpersistence. This finding, however, is less pronounced during the era of the Great Moderation and the FederalReserve System’s commitment to inflation targeting.

Keywords

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

Disciplines

Economics

Language

English

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