CPI inflation in Africa: fractional persistence, mean reversion and nonlinearity

O. S. Yaya; A. E. Ogbonna; O. J. Akintande; H. M. Adegoke

doi:10.21307/stattrans-2019-027

CPI inflation in Africa: fractional persistence, mean reversion and nonlinearity

O. S. Yaya Economic and Financial Statistics Unit, Department of Statistics, University of Ibadan, Nigeria ORCID:http://orcid.org/0000-0002-7554-3507 , A. E. Ogbonna Centre for Econometric and Allied Research, University of Ibadan & Economic and Financial Statistics Unit, Department of Statistics, University of Ibadan, Nigeria ORCID:http://orcid.org/0000-0002-9127-5231 , O. J. Akintande Laboratory for Interdisciplinary Statistical Analysis, Department of Statistics, University of Ibadan, Nigeria ORCID:https://orcid.org/0000-0001-5458-9795 , H. M. Adegoke Economic and Financial Statistics Unit, Department of Statistics, University of Ibadan, Nigeria Statistics in Transition new series, vol. 20, 2019, 3, pages: 119-132 Published online: 30 August 2019 DOI 10.21307/stattrans-2019-027

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ABSTRACT

Price stability has been one of the key mandates that apex monetary authorities strive to achieve globally. While most developed economies have achieved single digit inflation rates, most developing economies, especially African countries still experience alarming double-digit inflation rates. This paper therefore examined the dynamics of inflation in sixteen African countries. We employed the fractional persistence framework with linear trend and non-linear specifications based on Chebyshev’s polynomial in time. The results indicated nonlinear time trend in inflation for most of the countries. With the exception of Burkina Faso, which exhibited plausibility of naturally reverting to its mean level, the majority of the selected African countries would require stronger interventions to revert their observed inflationary levels to their mean levels.

KEYWORDS

Africa, Fractional Integration, Inflation Rate, Mean Reversion, Nonlinear Trend, Structural Break

JEL

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