Mean reversion of inflation rates in seven Eastern European countries: An application of a fourier quantile unit root test.

This paper applies recently developed Fourier quantile unit root test to investigate timeseries property of inflation in seven Eastern European countries. Thismethod combines the quantile unit root test with smooth unknown multiple breaks through Fourier function, and has good size and power when the data follows heavy tailed distribution. Our results showthat the inflation rates are stationary within each quantile for Czech Republic, Bulgaria and Lithuania, while the other four countries contain a unit root within some quantiles. We also find the speed of inflation adjustment towards to its long-run equilibrium for each country is asymmetric. Our results have important policy implications for monetary authorities in these Eastern European countries. [ABSTRACT FROM AUTHOR]