A Nonlinear Approach to Tunisian Inflation Rate

Thouraya Boujelbène Dammak
Kamel Helali
JEL codes: 
C01 - Econometrics, C22 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models, C24 - Truncated and Censored Models; Switching Regression Models, E00 - General, E31 - Price Level; Inflation; Deflation, E52 - Monetary Policy.
In this study, we investigated the properties and the macroeconomic performance of the nonlinearity of the Inflation Rate Set in Tunisia. We developed an inference asymptotic theory for an unrestricted two-regime threshold autoregressive (TAR) model with an autoregressive unit root. We proposed two types of tests namely asymptotic and bootstrap-based. These tests as well as the distribution theory allow a joint consideration of nonlinear thresholds and non-stationary unit roots. Our empirical results reveal a strong evidence of a threshold effect. This makes clear the possibility of non stationary and nonlinear of the Monthly Inflation Rate in Tunisia for the 1994.01-2011.06 period. While the Perron test found a unit root, our TAR unit root tests are arguably significant. Then, the evidence is quite strong that the inflation rate is not a unit root process.
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