African Journal of Business Management
Subscribe to AJBM
Full Name*
Email Address*

Article Number - 2C7917F20867

Vol.6(3), pp. 888-897 , January 2012
DOI: 10.5897/AJBM11.1172
ISSN: 1993-8233

Full Length Research Paper

Long memory, structural breaks and mean shifts in the inflation rates in Nigeria

Luis A. Gil-Alana1*, Olanrewaju I. Shittu2, OlaOluwa S. Yaya2

1Faculty of Economics, University of Navarra, Pamplona, Spain.

2University of Ibadan, Oyo State, Nigeria.


 Accepted: 01 August 2011  Published: 25 January 2012

Copyright © 2012 Author(s) retain the copyright of this article.
This article is published under the terms of the Creative Commons Attribution License 4.0

This paper deals with the analysis of the inflation rate in Nigeria. We use long range dependence techniques based on fractional integration or I(d) models, incorporating structural breaks in the model. The results indicate that inflation in Nigeria displays long memory behaviour, with an order of integration of about 0.3 in spite of the existence of breaks at different periods. Including the growth rate of money (M1) as an exogenous term, the results indicate that this variable significantly affects inflation, two and three periods (quarters) after the initial shock.


Key words: Inflation rate, long memory, structural breaks, mean shifts, money supply.

Adebiyi MA (2009). Inflation Targeting: Can we establish a Stable and Predictable Relationship between Inflation and monetary Policy instruments in Nigeria and Ghana? In: Applied Econometrics and Macroeconometric Modeling in Nigeria. Ibadan University Press, Nigeria.
Backus D, Zin S (1993). Long memory inflation uncertainty. Evidence from the term structure of interest rates. J. Mon. Cred. Bank, 25: 681-700.
Barro R (1993). Macroeconomics, 4th Edition, New York, Willey.
Bernanke BS, Laubach T, Mishkin FS, Posen AS (1999). Inflation Targeting. Lessons from the International Experience. Princeton University Press.
Bhattacharya RN, Gupta VK, Waymire E (1983). The Hurst effect under trends. J. Appl. Prob., 20: 649-662.
Bloomfield P (1973). An exponential model in the spectrum of a scalar time series. Biometrika, 60: 217-226.
Chimobi OP, Igwe OL (2010). Budget deficit, money supply and inflation in Nigeria. Eur. J. Econ. Fin. Adm. Sci., 19.
Dahlhaus R (1989). Efficient parameter estimation for self-similar process. Ann. Stat., 17: 1749-1766.
Delgado M, Robinson PM (1994). New methods for the analysis of long memory time series. Application to Spanish inflation. J. For., 13: 97-107.
Dewald W (1998). Money still matters. Fed. Res. Bank St. Louis Rev., 80: 13-24.
Diebold FX, Inoue A (2001). Long memory and regime switching. J. Economet., 105: 131-159.
Dwyer GP (1998). Is money a leading indicator of inflation. Unpublished
manuscript. Fed. Res. Bank Atlanta.
Dwyer GP, Hafer RW (1988). Is money irrelevant? Fed. Res. Bank St. Louis Rev. pp. 3-17.
Friedman M (1992). Money Mischief. Episodes in Monetary History. New York, Harcourt Brace Jovanovich.
Gil-Alana LA (2008). Fractional integration and structural breaks at unknown periods of time. J. Time Ser. An., 29: 163-185.
Gil-Alana LA (2011a). Inflation in South Africa. A long memory approach. Econ. Let., 11(3): 207-209.
Granger CWJ, Hyung N (2004). Occasional structural breaks and long memory with an application to the S&P 500 absolute stock returns. J. Emp. Finan., 11: 399-421.
Hassler U (1993). Regression of spectral estimators with fractionally integrated time series. J. Time Ser. An., 14: 369-380.
Lucas RE (1980). Two illustration of the Quantity Theory of Money. Am. Econ. Rev., 70: 1005-1014.
Mandel MJ (1999). Rivers of Cash Won't Swamp th Economy. Bus. Week, 8: 34.
Masha I (2000). New perspectives on inflation in Nigeria" Central Bank of Nigeria. CBN, Econ. Fin. Rev., 38(2): 34-56.
McCandless GT, Weber WE (1995). Some monetary facts. Fed. Res. Bank Minneapolis Quart. Rev., 19(3): 2-11.
Gil-Alana et al. 897
Moser GG (1995). The main determinants of inflation in Nigeria. IMF Working Paper pp. 94-76
Ohanissian A, Russell JR, Tsay RS (2008). True or spurious long memory? A new test. J. Bus. Econ. Stat., 26: 161-175.
Phillips PCB, Shimotsu K (2005). Exact local Whittle estimation of fractional integration. Ann. Stat., 33: 1890-1933.
Robinson PM (1994). Efficient tests of nonstationary hypotheses. J. Am. Stat. Assoc., 89: 1420-1437.
Robinson PM (1995). Gaussian semi-parametric estimation of long range dependence. Ann. Stat., 23: 1630-1661.
Rolnick AJ, Weber WE (1995). Inflation, money and output under alternative monetary standards. Fed. Res. Bank Minneapolis Res. Dep.
Shittu OI, Yaya OS (2010). On fractionally integrated logistic smooth transitions in time series. Am. J. Sc. Ind. Res.,1: 439-447.
Teverovski V, Taqqu MS (1997). Testing for long range dependence in the presence of shifting means or a slow declining trend using a variance-type estimator. J. Time Ser. An., 18: 279-304.


APA (2012). Long memory, structural breaks and mean shifts in the inflation rates in Nigeria. African Journal of Business Management, 6(3), 888-897.
Chicago Luis A. Gil-Alana, Olanrewaju I. Shittu, OlaOluwa S. Yaya. "Long memory, structural breaks and mean shifts in the inflation rates in Nigeria." African Journal of Business Management 6, no. 3 (2012): 888-897.
MLA Luis A. Gil-Alana, Olanrewaju I. Shittu, OlaOluwa S. Yaya. "Long memory, structural breaks and mean shifts in the inflation rates in Nigeria." African Journal of Business Management 6.3 (2012): 888-897.
DOI 10.5897/AJBM11.1172

Subscription Form