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Long-memory modeling and forecasting: evidence from the U.S. historical series of inflation

Long-memory modeling and forecasting: evidence from the U.S. historical series of inflation AbstractWe 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Studies in Nonlinear Dynamics & Econometrics de Gruyter

Long-memory modeling and forecasting: evidence from the U.S. historical series of inflation

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Publisher
de Gruyter
Copyright
© 2020 Walter de Gruyter GmbH, Berlin/Boston
ISSN
1558-3708
eISSN
1558-3708
DOI
10.1515/snde-2018-0116
Publisher site
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Abstract

AbstractWe 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.

Journal

Studies in Nonlinear Dynamics & Econometrics – de Gruyter

Published: Dec 29, 2021

Keywords: long memory; time-varying persistence; U.S. inflation; wavelet analysis; C13; C22; C32; C54; E31

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