Inflation Dynamics in the ABC (Argentina, Brazil and Chile) countries

This research analyses the inertia and persistence of headline and sectoral inflation for Argentina (two periods), Brazil and Chile using seasonal fractional integrated autoregressive moving average (S-ARFIMA model). Measuring inertia by the sum of the autoregressive coefficients, there is evidence of: (i) headline, clothing, health, housing and miscellaneous inertial inflation larger in Argentina (second period) than in Chile and Brazil, (ii) inertial inflation of food and beverages is larger for Chile than for Argentina (second period) and Brazil, and (iii) inertial inflation of education larger in Brazil than in Chile, which in turn is larger than in Argentina (second period). Measuring persistence by the size of the fractionally integrated coefficient, our results suggest long-memory or long-dependence of Brazilian headline, clothing and health inflation, and Chilean alcoholic beverages. We show also that the quarter-life of headline inflation occurs in 20, 3 and 15 months in Argentina (second period), Brazil and Chile, while its half-life takes 29, 15 and 13 months, respectively.