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IS THERE AN ASYMMETRIC BEHAVIOUR IN AFRICAN INFLATION? A NON-LINEAR APPROACH

Authors


  • Luis A. Gil-Alana gratefully acknowledges financial support from the Ministerio de Ciencia y Tecnología (ECO2008-03035 ECON Y FINANZAS, Spain) and from a PIUNA Project from the University of Navarra. Juan Carlos Cuestas acknowledges financial support from the Comisión Interministerial de Ciencia y Tecnología CICYT project ECO2008-05908-C02-01/ECON and Junta de Castilla y León SA003B10-1. The authors gratefully acknowledge Carmen Díaz-Roldán and two anonymous referees for their useful comments. The usual disclaimer applies.

Lecturer in Economics, Department of Applied Economics II, Faculty of Economics and Business, University of A Coruña, A Coruña, Spain, 15071. E-mail: emourelle@udc.es

Abstract

In this paper we test the inflation persistence hypothesis as well as model the long-run behaviour of inflation rates in a pool of African countries using a non-linear framework. In order to do so, we rely on unit root tests applied to non-linear models and fractional integration. The results show that the hypothesis of inflation persistence does not hold empirically for most of the countries. In addition, the estimated models (logistic smooth transition autoregressions) are stable in the sense that the variable tends to remain in the regime (low inflation or high inflation) once reached, and changes between regimes are only achieved after a shock. The results also indicate that the effects of the shocks on inflation tend to die out; exogenous factors, i.e. supply shocks and inertia may be causing this outcome, as they play a substantial role in the determination of the inflation rates for our selected African countries.

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