A Study of Testing Mean Reversion in the Inflation Rate of Iran’s Provinces: New Evidence Using Quantile Unit Root Test

Author

Department of Economics, Qazvin Branch, Islamic Azad University, Qazvin, Iran.

Abstract

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his paper is to examine the mean reverting properties of inflation rates for Iran’s 25 provinces over the period from 1990:4 to 2017:7. To the end, we use various conventional univariate linear and non-linear unit root tests, as well as quantile unit root test by Koenker and Xiao (2004). Results of conventional unit root tests indicate that the null hypothesis of the unit root test is accepted for most of the inflation rate series. Using the quantile unit root test, we found that the null hypothesis of the unit root test is rejected for all inflation rate series, globally. But the mean-reverting properties are rejected at low quantiles. The empirical results have important policy implications.
 

Keywords