The volatility of Mexican inflation throughout the 1980s debt crisis and the 1994 tequila crisis provides an interesting backdrop to test for structural breaks and inflation stationarity in a developing country context. By allowing for multiple breaks, four inflationary regimes are identified during the period 1980 to 2004. Initial unit root tests reject stationarity; however, by incorporating structural break analysis, inflation is found to be I(0). The structural break analysis and the stationarity analysis point to monetary and fiscal determinants of inflation.
Available at: http://works.bepress.com/tony_caporale/33/