Multi-Factor Gegenbauer Processes and European Inflation Rates

CESifo Working Paper Series No. 2648

DIW Berlin Discussion Paper No. 879

28 Pages Posted: 28 May 2009

See all articles by Guglielmo Maria Caporale

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance; London South Bank University; CESifo (Center for Economic Studies and Ifo Institute); German Institute for Economic Research (DIW Berlin)

Luis A. Gil-Alana

University of Navarra - Department of Economics

Date Written: May 2009

Abstract

In this paper we specify a multi-factor long-memory process that enables us to estimate the fractional differencing parameters at each frequency separately, and adopt this framework to model quarterly prices in three European countries (France, Italy and the UK). The empirical results suggest that inflation in France and Italy is nonstationary. However, while for the former country this applies both to the zero and the seasonal frequencies, in the case of Italy the nonstationarity comes exclusively from the long-run or zero frequency. In the UK, inflation seems to be stationary with a component of long memory at both the zero and the semi-annual frequencies, especially at the former.

Keywords: fractional integration, long memory, inflation

JEL Classification: C22, O40

Suggested Citation

Caporale, Guglielmo Maria and Gil-Alana, Luis A., Multi-Factor Gegenbauer Processes and European Inflation Rates (May 2009). CESifo Working Paper Series No. 2648, DIW Berlin Discussion Paper No. 879, Available at SSRN: https://ssrn.com/abstract=1406950 or http://dx.doi.org/10.2139/ssrn.1406950

Guglielmo Maria Caporale (Contact Author)

Brunel University London - Department of Economics and Finance ( email )

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London South Bank University ( email )

Centre for Monetary and Financial Economics
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United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

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German Institute for Economic Research (DIW Berlin) ( email )

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Luis A. Gil-Alana

University of Navarra - Department of Economics ( email )

Campus de Arrosadia
Pamplona, 31006
Spain

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