Demand for Money: A Study in Testing Time Series for Long Memory and Nonlinearity
University of Ulster at Coleraine
Michael J. Harrison
University of Dublin - Trinity College
Edward J. O'Brien
European Central Bank (ECB)
Economic and Social Review, Vol. 38, No. 1, pp. 1-24, Spring 2007
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.
Number of Pages in PDF File: 24Accepted Paper Series
Date posted: October 22, 2007
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