Many previous analyses of inflation have used either long memory or nonlinear time series models. This paper suggests a simple adaptive modification of the basic ARFIMA model, which uses a flexible Fourier form to allow for a time varying intercept. Simulation evidence suggests that the model...

Previous models of monthly CPI inflation time series have focused on possible regime shifts, non-linearities and the feature of long memory. This paper proposes a new time series model, named Adaptive ARFIMA; which appears well suited to describe inflation and potentially other economic time...

A strategy for estimating, ?filtering and forecasting time-varying factor betas is proposed. The approach is based on the multivariate realized regression principle, an omnibus noise ?filter and an adaptive long memory forecasting model. While the multivariate realized regression approach allows...

This paper introduces a new long memory volatility process, denoted by Adaptive FIGARCH, or A-FIGARCH, which is designed to account for both long memory and structural change in the conditional variance process. Structural change is modeled by allowing the intercept to follow a slowly varying...

What are the causes of exchange rate volatility? When second moments implications of theories of exchange rates determination are considered, long-term fundamental linkages between macroeconomic and exchange rate volatility can be envisaged. Moreover, as the exchange rate is an important...

In this paper we test for the existence of long memory and structural breaks in the realized variance process for the DM/US$ and Yen/US$ exchange rates. While long memory is evident in the actual processes, a structural break analysis reveals that this feature is partially explained by...

In the paper we propose a new methodological approach to core in- flation estimation, based on a frequency domain principal components estimator, suited to estimate systems of fractionally cointegrated processes. The proposed core inflation measure is the scaled common persistent factor in...

In this paper we study the zero frequency spectral properties of fractionally cointegrated long memory processes and introduce a new frequency domain principal components estimator of the cointegration space and the factor loading matrix for the long memory factors. We find that for fractionally...

As economic and financial integration between the US and the euro area is strong, assessing whether the recent US crisis may affect the process of real and nominal convergence within the euro area is important. The paper addresses this issue in the framework of a large-scale open economy...

As economic and financial integration between the US and the euro area is strong, assessing whether the recent US crisis may affect the process of real and nominal convergence within the euro area is important. The paper addresses this issue in the framework of a large-scale open economy...