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Modelling non-linear comovements between time series

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  • Catherine Kyrtsou

    ()
    (University of Macedonia, Department of Economics)

  • Costas Vorlow

    ()
    (Durham Business School)

Abstract

The main objective of this paper is to employ a new dynamic model that combines the bivariate noisy Mackey–Glass recently proposed by Kyrtsou and Labys [Kyrtsou, C., Labys, W., 2006. Evi- dence for chaotic dependence between US inflation and commodity prices. Journal of Macroeco- nomics 28(1), 256–266; Kyrtsou, C., Labys, W., 2007. Detecting positive feedback in multivariate time series: the case of metal prices and US inflation. Physica A 377(1), 227–229.] and the BEKK Garch processes. An empirical exercise using the US effective Federal fund rates and 3-month T-Bill rates will show that for specific time periods the comovements between series are due to inherent non-linear deterministic dynamics.

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Bibliographic Info

Paper provided by Durham University Business School in its series Working Papers with number 2008_01.

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Date of creation: 01 Jan 2008
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Handle: RePEc:dur:durham:2008_01

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Postal: Durham University Business School, Mill Hill Lane, Durham DH1 3LB, England
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Related research

Keywords: BEKK Garch and Mackey–Glass processes; Structural changes; Comovements; Interest rates; Non-linear dynamics;

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References

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  1. Jess Benhabib & Stephanie Schmitt-Groh� & Mart�n Uribe, 2002. "Chaotic Interest-Rate Rules," American Economic Review, American Economic Association, American Economic Association, vol. 92(2), pages 72-78, May.
  2. Paul Brockman & Mustafa Chowdhury, 1997. "Deterministic versus stochastic volatility: implications for option pricing models," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 7(5), pages 499-505.
  3. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 11(01), pages 122-150, February.
  4. Jean-Luc Demeulemeester & Claude Diebolt, 2007. "How much could economics gain from history: the contribution of cliometrics," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), Association Française de Cliométrie (AFC), vol. 1(1), pages 7-17, April.
  5. Kyrtsou, Catherine & Labys, Walter C., 2007. "Detecting positive feedback in multivariate time series: The case of metal prices and US inflation," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 377(1), pages 227-229.
  6. Lucas, Robert E, Jr, 1975. "An Equilibrium Model of the Business Cycle," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 83(6), pages 1113-44, December.
  7. Froyen, Richard T. & Waud, Roger N., 2002. "The determinants of Federal Reserve policy actions: A re-examination," Journal of Macroeconomics, Elsevier, Elsevier, vol. 24(3), pages 413-428, September.
  8. Haug Alfred A & Siklos Pierre L, 2006. "The Behavior of Short-Term Interest Rates: International Evidence of Non-Linear Adjustment," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, De Gruyter, vol. 10(4), pages 1-34, December.
  9. Lucio Sarno & Daniel L. Thornton, 2002. "The dynamic relationship between the federal funds rate and the Treasury bill rate: an empirical investigation," Working Papers, Federal Reserve Bank of St. Louis 2000-032, Federal Reserve Bank of St. Louis.
  10. Bali, Turan G. & Wu, Liuren, 2006. "A comprehensive analysis of the short-term interest-rate dynamics," Journal of Banking & Finance, Elsevier, Elsevier, vol. 30(4), pages 1269-1290, April.
  11. Kyrtsou, Catherine & Labys, Walter C., 2006. "Evidence for chaotic dependence between US inflation and commodity prices," Journal of Macroeconomics, Elsevier, Elsevier, vol. 28(1), pages 256-266, March.
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Citations

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Cited by:
  1. Catherine Kyrtsou & Michel Terraza, 2008. "Seasonal Mackey-Glass-GARCH process and short-term dynamics," Discussion Paper Series 2008_09, Department of Economics, University of Macedonia, revised Sep 2008.
  2. Weihong Huang & Huanhuan Zheng & Wai-Mun Chia, 2013. "Asymmetric returns, gradual bubbles and sudden crashes," The European Journal of Finance, Taylor & Francis Journals, Taylor & Francis Journals, vol. 19(5), pages 420-437, May.

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