Which is the best model for the US inflation rate : a structural changes model or a long memory
AbstractThis paper analyzes the dynamics of the US inflation series using two classes of models : structural changes models and Long memory processes. For the first class, we use the Markov Switching (MS-AR) model of Hamilton (1989) and the Structural Change (SCH-AR) model using the sequential method proposed by Bai and Perron (1998, 2003). For the second class, we use the ARFIMA process developed by Granger and Joyeux (1980). Moreover, we investigate whether the observed long memory behavior is a true behavior or a spurious behavior created by the presence of breaks in time series. Our empirical results provide evidence for changes in mean, breaks dates coincide exactly with some economic and financial events such Vietnam War and the two oil price shocks. Moreover, we show that the observed long memory behavior is spurious and is due to the presence of breaks in data set.
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Bibliographic InfoPaper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number b07061.
Length: 24 pages
Date of creation: Nov 2007
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Structural breaks models; long range dependance; inflation series.;
Find related papers by JEL classification:
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
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- Dominique Guegan & Philippe de Peretti, 2010.
"An omnibus test to detect time-heterogeneity in time series,"
Documents de travail du Centre d'Economie de la Sorbonne
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UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers)
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- Peter Smith, 2010. "Discussion of the Fisher Effect Puzzle: A Case of Non-Linear Relationship," Open Economies Review, Springer, vol. 21(1), pages 105-108, February.
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