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Time-varying ARFIMA-GARCH model with symmetric thresholds: applications to inflation

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  • Zhengxun Tan
  • Juan Liu

Abstract

This study suggests a structural modification of the basic ARFIMA-GARCH model by allowing for time-varying baseline mean and, especially, symmetric threshold GARCH. By applying it to the inflation of G7 countries, we find that past excessive positive or negative shocks have positive impacts on future volatility and GARCH persistence. Compared with the ARFIMA-GARCH model, the model in this study has superior performances in identifying and characterizing structural changes and excessive shocks.

Suggested Citation

  • Zhengxun Tan & Juan Liu, 2021. "Time-varying ARFIMA-GARCH model with symmetric thresholds: applications to inflation," Applied Economics Letters, Taylor & Francis Journals, vol. 28(5), pages 373-377, March.
    • Handle: RePEc:taf:apeclt:v:28:y:2021:i:5:p:373-377
    DOI: 10.1080/13504851.2020.1753877
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    Cited by:

    1. Lujia Bai & Weichi Wu, 2021. "Detecting long-range dependence for time-varying linear models," Papers 2110.08089, arXiv.org, revised Mar 2023.

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