Inflation Dynamics in Uganda: A Quantile Regression Approach

Francis Anguyo, Rangan Gupta and Kevin Kotze
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Francis Anguyo: School of Economics, University of Cape Town, Rondebosch, South Africa and Research Department, Bank of Uganda, Kampala, Uganda

No 201772, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper considers the measurement of inflation persistence in Uganda and how this has changed over time. As the data does not follow a normal distribution, we make use of the quantile regression approach to investigate how various shocks may affect the rate of inflation within different quantiles. The measures of inflation include headline inflation, the central bank's measure of core inflation, and an alternative measure of core inflation. The results suggest that while a unit root is found in many of the upper quantiles of headline inflation, there is evidence of mean reversion within the lower quantiles. In addition, we find higher levels of persistence after 2006 and during the inflation-targeting period. When considering the degree of persistence in the central bank's measure of core inflation, the results suggest that there is a unit root in this measure during the inflation-targeting period. In addition, the alternative measure of core inflation, which is derived from a wavelets transformation, provides similar results. However, this measure is less volatile and more correlated with headline inflation. All the results suggest that large positive deviations from the mean would influence the permanent behaviour of inflation, while small negative deviations are relatively short-lived.

Keywords: Inflation persistence; Quantile regression; Structural break; monetary policy (search for similar items in EconPapers)
JEL-codes: C22 E31 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2017-10
New Economics Papers: this item is included in nep-cba, nep-cta, nep-mac and nep-mon
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Related works:
Journal Article: Inflation dynamics in Uganda: a quantile regression approach (2020)
Working Paper: Inflation Dynamics in Uganda: A Quantile Regression Approach (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201772

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