Modelling the Density of Inflation Using Autoregressive Conditional Heteroscedasticity, Skewness, and Kurtosis Models
The paper aimed at modelling the density of inflation based on time-varying conditional variance, skewness and kurtosis model developed by Leon, Rubio, and Serna (2005) who model higher-order moments as GARCH-type processes by applying a Gram-Charlier series expansion of the normal density function. Additionally, it extended their work by allowing both conditional skewness and kurtosis to have an asymmetry term. The results revealed the significant persistence in conditional variance, skewness and kurtosis which indicate high asymmetry of inflation. Additionally, diagnostic tests reveal that models with nonconstant volatility, skewness and kurtosis are superior to models that keep them invariant.
Volume (Year): XXX (2011)
Issue (Month): 2 (November)
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References listed on IDEAS
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- Michael F. Bryan & Stephen G. Cecchetti, 1996.
"Inflation and the Distribution of Price Changes,"
NBER Working Papers
5793, National Bureau of Economic Research, Inc.
- Bollerslev, Tim, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
Journal of Econometrics,
Elsevier, vol. 31(3), pages 307-327, April.
- Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
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