Reexamining the linkages between inflation and output growth: A bivariate ARFIMA-FIGARCH approach
AbstractIn this paper, given recent theoretical developments that inflation can exhibit long memory properties due to the output growth process, we propose a new class of bivariate processes to simultaneously investigate the dual long memory properties in the mean and the conditional variance of inflation and output growth series. We estimate the model using monthly UK data and document the presence of dual long memory properties in both series. Then, using the conditional variances generated from our bivariate model, we employ Granger causality tests to scrutinize the linkages between the means and the volatilities of inflation and output growth.
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Bibliographic InfoPaper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2006_8.
Date of creation: Jun 2006
Date of revision:
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-06-24 (All new papers)
- NEP-CBA-2006-06-24 (Central Banking)
- NEP-ECM-2006-06-24 (Econometrics)
- NEP-ETS-2006-06-24 (Econometric Time Series)
- NEP-MAC-2006-06-24 (Macroeconomics)
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