Modeling U.S. Historical Time-Series Prices and Inflation Using Various Linear and Nonlinear Long-Memory Approaches

23 Pages Posted: 18 Nov 2016

See all articles by Giorgio Canarella

Giorgio Canarella

University of Nevada, Las Vegas

Luis A. Gil-Alana

University of Navarra - Department of Economics

Rangan Gupta

University of Pretoria - Department of Economics

Stephen M. Miller

University of Nevada, Las Vegas - Department of Economics; University of Connecticut - Department of Economics

Date Written: November 17, 2016

Abstract

This paper estimates the complete historical US price data by employing a relatively new statistical methodology based on long memory. We consider, in addition to the standard case, the possibility of nonlinearities in the form of nonlinear deterministic trends as well as the possibility that persistence exists at both the zero frequency and a frequencies away from zero. We model the fractional nonlinear case using Chebyshev polynomials and model the fractional cyclical structures as a Gegenbauer process. We find in the latter case that that secular (i.e., long-run) persistence and cyclical persistence matter in the behavior of prices, producing long-memory effects that imply mean reversion at both the long-run and cyclical frequencies.

Keywords: Persistence, Cyclicality, Chebyshev Polynomials, Gegenbauer Processes

JEL Classification: C22, E3

Suggested Citation

Canarella, Giorgio and Gil-Alana, Luis A. and Gupta, Rangan and Miller, Stephen M., Modeling U.S. Historical Time-Series Prices and Inflation Using Various Linear and Nonlinear Long-Memory Approaches (November 17, 2016). Available at SSRN: https://ssrn.com/abstract=2871686 or http://dx.doi.org/10.2139/ssrn.2871686

Giorgio Canarella

University of Nevada, Las Vegas ( email )

4505 S. Maryland Parkway
Box 456005
Las Vegas, NV 89154-6005
United States

Luis A. Gil-Alana

University of Navarra - Department of Economics ( email )

Campus de Arrosadia
Pamplona, 31006
Spain

Rangan Gupta

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria, 0002
South Africa

Stephen M. Miller (Contact Author)

University of Nevada, Las Vegas - Department of Economics ( email )

4505 S. Maryland Parkway
Box 456005
Las Vegas, NV 89154
United States
702-895-3776 (Phone)
702-895-1354 (Fax)

HOME PAGE: http://faculty.unlv.edu/smiller/

University of Connecticut - Department of Economics

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States

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