A Study on Whether Shocks Have a Permanent Effect on Inflation: The Case of Denmark, Sweden, and Norway
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https://doi.org/10.5281/zenodo.10444377Keywords:
Unit Root, Inflation, ShocksAbstract
The aim of this study is to reveal whether the inflation series (calculated separately for Denmark, Sweden, and Norway) is permanently affected by shocks. Depending on data availability, the analysis period covers the period 1968–2022 for Denmark, the period 1956–2022 for Sweden, and the period 1951–2022 for Norway. Annual inflation data were taken into account in the study. The reason for choosing annual inflation data is to avoid seasonal effects. For the Norwegian inflation data, the result of the unit root test proposed by Dickey and Fuller (1979) was taken into account. For Swedish inflation data, the result of the stationarity test suggested by Carrion-i-Silvestre and Sansó (2007) was taken into account. The unit root test recommended by Kapetanios et al. (2003), the unit root test proposed by Kruse (2011), and the unit root test suggested by Güriş and Güriş (2022) were applied to the inflation data of Denmark. As a result of the empirical analysis, it can be said that the inflation series calculated separately for Denmark and Norway is not permanently affected by the shocks (it does not contain a unit root). If structural breaks are taken into account, it can also be stated that the Swedish inflation series does not contain a unit root. Based on the findings, it is recommended that no interventions be made to reduce the impact of minor shocks on inflation in Denmark, Sweden, and Norway.
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