Examination of inflation convergence using fourier unit root tests: OECD countries

This study examines the validity of the inflation convergence hypothesis in OECD countries, which include both developed and developing countries. Using monthly data for the period 1995:01 to 2023:01, the results of the analysis were obtained using the Fourier-Kruse (2019) test with constant, constant and trend model. Thus, the aim is to provide more comprehensive results with advanced econometric methods that consider both structural breaks and non-linear relationships at the same time. According to the results of the Fourier-Kruse (2019) test, all the series except for Korea and Italy are stationary in the fixed model, while all the series except for Italy, Hungary, Korea and Turkey are stationary in the fixed and trend model. For stationary series, the F-statistic proposed by Becker et al. (2006) is used. Accordingly, the hypothesis of convergence in the stationary model holds for Austria, Belgium, Canada, Chile, Colombia, Denmark, Finland, France, Germany, Hungary, Iceland, Ireland, Japan, Latvia, Lithuania, Luxembourg, Mexico, Norway, Poland, Portugal, Slovenia, Spain, Sweden, Switzerland and Turkey. In the constant and trend model, the convergence hypothesis is found to hold for Austria, Belgium, Canada, Colombia, Denmark, Finland, France, Germany, Iceland, Ireland, Japan, Latvia, Lithuania, Luxembourg, Mexico, Norway, Poland, Portugal, Slovakia, Spain, Sweden and Switzerland. According to the results, inflation convergence has generally shown a positive trend in the OECD countries. The countries where inflation convergence has not been achieved may be due to divergences in economic dynamics and monetary policies.