In this paper we examine the role of permanent and transitory shocks in explaining variations in the S&P 500, Dow Jones and the NASDAQ. Our modeling technique involves imposing both common trend and common cycle restrictions in extracting the variance decomposition of shocks. We find that: (1)...

This article examines the existence and stability of the consumption function in the United States of America (US) beginning in the 1950s. In order to obtain a stable long run relationship, we have introduced two innovative elements into the analysis of the life-cycle of the consumption function...

Owing to the vague fluctuation of energy prices from time to time, a new energy model, which considers both the mean-reverting behavior and the long memory property, is proposed in this paper. Since the problem of estimating parameters, in discrete time for this model, plays a central role in...

This paper examines asymmetries in the impact of monetary policy on the middle segment of the South African housing market from 1966:M2 to 2011:M12. We use Markov-switching vector autoregressive (MS-VAR) model in which parameters change according to the phase of the housing cycle. The results...

In this paper we discuss the calibration issues of power models built on mean-reverting processes combined with long memory. The unknown parameters of fractional mean-reversion processes are estimated by a hybrid estimation method, which is built upon the marriage of the quadratic variation and...

The econometric literature has recently focused attention on the relationship between the Beveridge–Nelson decomposition and unobserved components processes when decomposing time series into permanent and transitory shocks. This paper shows the existence of an algebraic linkage between reduced...

The purpose of the paper is to revisit the inflation–output gap relationship using a new approach known as the wavelet transform. This approach combines the classical time series analysis with frequency domain analysis and presents the advantages of assessing the co-movement of the two series...

This paper analyzes the feasibility of a monetary union in East Asia focusing on business cycles synchronization. Considering the critical role of trade integration in the East Asian integration process, we study whether East Asian countries are characterized by business cycle synchronization....

Structural breaks in a trending variable have been specified as changes in the drift parameter in the trend component, but extraordinary shocks causing these breaks have not been explicitly formulated. In this paper, the Hodrick–Prescott filter is extended by assuming two kinds of variance for...

This paper reassesses the ‘stylised facts’ of Australia's contemporary business cycle, by calculating select moments of the cyclical components in quarterly postwar macroeconomic data. In particular, the robustness of the cross-correlation sample moments to the detrending procedure are...