In this paper we show that the long-run stock and bond volatility and the long-run stock-bond correlation depend on macroeconomic uncertainty. We use the mixed data sampling (MIDAS) econometric approach. The findings are in accordance with the flight-to-quality phenomenon when macroeconomic...

We investigate the long-run stock-bond correlation using a novel model that combines the dynamic conditional correlation model with the mixed-data sampling approach. The long-run correlation is affected by both macro-finance variables (historical and forecasts) and the lagged realized...

We propose a new simple model incorporating the implication of the quantity theory of money that money growth and inflation should move one for one in the long run, and, hence, inflation should be predictable by money growth. The model fits postwar U.S. data well, and beats common univariate...

Economy-wide effects of shocks to the US federal funds rate are estimated in a state space model with 120 US macroeconomic and financial time series driven by the dynamics of the federal funds rate and a few dynamic factors. This state space system is denoted a factor-augmented VAR (FAVAR) by...

Cointegration imposes restrictions on the frequency domain behavior of a time series at the zero-frequency. We derive these restrictions for a multivariate fractionally cointegrated system. In particular, we consider a p-vector time series integrated of order d with r cointegrating relations,...

In static single equation cointegration regression models the OLS estimator will have a non-standard distribution unless regressors are strictly exogenous. In the literature a number of estimators have been suggested to deal with this problem, especially by the use of semi-nonparametric...

The present paper tests for the existence of multicointegration between real per capita private consumption expenditure and real per capita disposable personal income in the USA. In doing so, we exploit the fact that the flows of disposable income and consumption expenditure on the one hand, and...

Many key macro-economic and financial variables are characterised by permanent changes in unconditional volatility. In this paper we analyse vector autoregressions with non-stationary (unconditional) volatility of a very general form, which includes single and multiple volatility breaks as...

A review is given of parametric estimation methods for discretely sampled multivariate diffusion processes. The main focus is on estimating functions and asymptotic results. Maximum likelihood estimation is briefly considered, but the emphasis is on computationally less demanding martingale...

This paper proposes a methodology for modelling time series of realized covariance matrices in order to forecast multivariate risks. The approach allows for flexible dynamic dependence patterns and guarantees positive definiteness of the resulting forecasts without imposing parameter...