Which is the best model for the US inflation rate: a structural changes model or a long memory process?

Lanouar Charfeddine (1) , Dominique Guegan (2)

1 OEP
2 CES - Centre d'économie de la Sorbonne

This paper analyzes the dynamics of the US inflation series using two classes of models: structural changes models and Long memory processes. For the first class, we use the Markov Switching (MS-AR) model of Hamilton (1989) and the Structural Change (SCH-AR) model using the sequential method proposed by Bai and Perron (1998, 2003). For the second class, we use the ARFIMA process developed by Granger and Joyeux (1980). Moreover, we investigate whether the observed long memory behavior is a true behavior or a spurious behavior created by the presence of breaks in time series. Our empirical results provide evidence for changes in mean, breaks dates coincide exactly with some economic and financial events such Vietnam War and the two oil price shocks. Moreover, we show that the observed long memory behavior is spurious and is due to the presence of breaks in data set.

Ce papier analyse la dynamique de la série du taux d'inflation américaine en utilisant deux types de modèles : les modèles à changements de régimes et les processus à mémoire longue. Pour les modèles à changements de régimes, nous considérons les modèles structurels de Bai et Perron (1998, 2003) et les modèles à changements de régimes markoviens d'Hamilton (1989). Pour la seconde classe, nous utilisons les processus à mémoire longue de type ARFIMA. Nous appliquons notre travail à des données d'inflation.

Mots clés: inflation series; Structural breaks models; long range dependance; inflation series.

Mots clés: Changements de régimes; longue mémoire; taux d'inflation.

Domaines: Economies et finances; Méthodes et statistiques; Probabilités [math.PR]; Statistiques [math.ST]; Théorie [stat.TH]

Lanouar Charfeddine, Dominique Guegan. Which is the best model for the US inflation rate: a structural changes model or a long memory process?. 2007. ⟨halshs-00188309⟩