Multi-Factor Gegenbauer Processes and European Inflation Rates
نویسندگان
چکیده
In this paper we specify a multi-factor long-memory process that enables us to estimate the fractional differencing parameters at each frequency separately, and adopt this framework to model quarterly prices in three European countries (France, Italy and the UK). The empirical results suggest that inflation in France and Italy is nonstationary. However, while for the former country this applies both to the zero and the seasonal frequencies, in the case of Italy the nonstationarity comes exclusively from the long-run or zero frequency. In the UK, inflation seems to be stationary with a component of long memory at both the zero and the semi-annual frequencies, especially at the former. JEL Classification: C22, O40
منابع مشابه
Inflation and Cost Push in Iran's Economy
There have been two broad theories of inflation, namely the demand-pull theory of inflation (that is nowadays mainly the monetary theory of inflation) and the cost-push theory of inflation. The mainstream macroeconomics views inflation as a monetary phenomenon in the long run. Iran has experienced double-digit rates of inflation for about four decades. Our main aim is an explanation for the lon...
متن کاملSimulation of Gegenbauer Processes using Wavelet Packets
In this paper, we study the synthesis of Gegenbauer processes using the wavelet packets transform. In order to simulate a 1-factor Gegenbauer process, we introduce an original algorithm, inspired by the one proposed by Coifman and Wickerhauser [1], to adaptively search for the best-ortho-basis in the wavelet packet library where the covariance matrix of the transformed process is nearly diagona...
متن کاملGeneralized Fractional Processes with Long Memory and Time Dependent Volatility Revisited
In recent years, fractionally-differenced processes have received a great deal of attention due to their flexibility in financial applications with long-memory. This paper revisits the class of generalized fractionally-differenced processes generated by Gegenbauer polynomials and the ARMA structure (GARMA) with both the long-memory and time-dependent innovation variance. We establish the existe...
متن کاملThe Effect of Macroeconomic Shocks on Inflation in Iran: A Vector Autoregressive Approach with Dynamic Parameters
Given the effects of inflation on the decline of household welfare and its impact on production and investment, identifying the factors affecting it in order to adjust inflation and achieve price stability is necessary. Therefore, using the TVP-FAVAR model, which differentiates the fluctuations in factors affecting inflation, we try to identify the effects of different shocks such as liquidity,...
متن کاملFinancial conditions and nonlinearities in the European Central Bank (ECB) reaction function: In-sample and out-of-sample assessment
The purpose of this study is to investigate how the ECB sets interest rates in the context of both linear and nonlinear policy reaction functions. It contributes to the current debate on central banks having additional objectives over and above inflation and output. Three findings emerge. First, the ECB takes financial conditions into account when setting interest rates. Second, amongst Taylor ...
متن کامل