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 the model...

The study is empirically motivated to analyze the performance of new class of Bayesian shrinkage priors that are powerful in reducing time-varying parameters to static ones to avoid over-fitting problem in time-varying parameter models. We utilized newly improved shrinkage priors in a...

This paper investigates the question of whether there exists evidence in support of inflation convergence within the European Union. The analysis also focuses on whether the Exchange Rate Mechanism (ERM) helped to accelerate inflation convergence in its member countries. The results of this...

Implications for signal extraction from specifying unobserved components (UC) models with correlated or orthogonal innovations have been well investigated. In contrast, the forecasting implications of specifying UC models with different state correlation structures are less well understood. This...

In this paper we investigate the effects of EU enlargement on price convergence. The internal market is expected to boost integration and increase efficiency and welfare through a convergence of prices in product markets. Two principal drivers are crucial to explain price developments. On the...

In this paper we investigate the effects of EU enlargement on price convergence. The internal market is expected to boost integration and increase efficiency and welfare through a convergence of prices in product markets. Two principal drivers are crucial to explain price developments. On the...

In this paper we study the determinants of citizens' trust in the European Central Bank during the start-up phase from 1999-2004. Using a country panel based on the Eurobarometer survey, we find that higher inflation rates reduce trust. Thus people appear to evaluate the performance of the ECB...

We propose a simple but effective estimation procedure to extract the level and the volatilitydynamics of a latent macroeconomic factor from a panel of observable indicators. Our approachis based on a multivariate conditionally heteroskedastic exact factor model that cantake into account the...

In this paper we study the determinants of citizens' trust in the European Central Bank during the start-up phase from 1999-2004. Using a country panel based on the Eurobarometer survey, we find that higher inflation rates reduce trust. Thus people appear to evaluate the performance of the ECB...