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Demand for Money: A Study in Testing Time Series for Long Memory and Nonlinearity

  • Derek Bond

    (University of Ulster)

  • Michael J. Harrison

    (Trinity College Dublin)

  • Edward J. O'Brien

    (European Central Bank)

This paper draws attention to the limitations of the standard unit root/cointegration approach to economic and financial modelling, and to some of the alternatives based on the idea of fractional integration, long memory models, and the random field regression approach to nonlinearity. Following brief explanations of fractional integration and random field regression, and the methods of applying them, selected techniques are applied to a demand for money dataset. Comparisons of the results from this illustrative case study are presented, and conclusions are drawn that should aid practitioners in applied time-series econometrics.

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File URL: http://www.esr.ie/Vol38_1/bond.pdf
File Function: First version, 2007
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Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 38 (2007)
Issue (Month): 1 ()
Pages: 1-24

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Handle: RePEc:eso:journl:v:38:y:2007:i:1:p:1-24
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  16. Juan J. Dolado & Jesús Gonzalo & Laura Mayoral, 2005. "Testing I(1) against I(d) alternatives in the presence of deteministic components," Economics Working Papers 957, Department of Economics and Business, Universitat Pompeu Fabra.
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