Inflation persistence for product groups in Brazil using the ARFIMA-GARCH model

This study uses ARFIMA-GARCH models and structural break tests to analyse the persistence of Brazilian inflation. Its main contribution is to carry out a disaggregated analysis for nine product groups. The main evidences found are: all price groups and aggregate inflation present a stationary behaviour with reversion to the long-term mean, but there are heterogeneities; aggregate persistence is overestimated due to aggregation bias; the hypothesis that state-regulated prices are more persistent is not confirmed; in turn, the results corroborate the existence of the service-puzzle; and, persistence in the food and beverage group, although low, was relatively higher than expected.