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Testing for conditional heteroscedasticity in the components of inflation

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dc.affiliation.dptoUC3M. Departamento de Estadísticaes
dc.contributor.authorBroto, Carmen
dc.contributor.authorRuiz Ortega, Esther
dc.contributor.otherBanco de España
dc.date.accessioned2010-07-08T07:57:44Z
dc.date.available2010-07-08T07:57:44Z
dc.date.issued2008
dc.description.abstractIn this paper we propose a model for monthly inflation with stochastic trend, seasonal and transitory components with QGARCH disturbances. This model distinguishes whether the long-run or short-run components are heteroscedastic. Furthermore, the uncertainty associated with these components may increase with the level of inflation as postulated by Friedman. We propose to use the differences between the autocorrelations of squares and the squared autocorrelations of the auxiliary residuals to identify heteroscedastic components. We show that conditional heteroscedasticity truly present in the data can be rejected when looking at the correlations of standardized residuals while the autocorrelations of auxiliary residuals have more power to detect conditional heteroscedasticity. Furthermore, the proposed statistics can help to decide which component is heteroscedastic. Their finite sample performance is compared with that of a Lagrange Multiplier test by means of Monte Carlo experiments. Finally, we use auxiliary residuals to detect conditional heteroscedasticity in monthly inflation series of eight OECD countries.
dc.format.mimetypeapplication/pdf
dc.identifier.urihttps://hdl.handle.net/10016/9025
dc.language.isoeng
dc.relation.ispartofseriesDocumentos de trabajo
dc.relation.ispartofseries0812
dc.rightsAtribución-NoComercial-SinDerivadas 3.0 España
dc.rights.accessRightsopen access
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.ecienciaEstadística
dc.subject.otherLeverage effect
dc.subject.otherQGARCH
dc.subject.otherSeasonality
dc.subject.otherStructural time series models
dc.subject.otherUnobserved component
dc.titleTesting for conditional heteroscedasticity in the components of inflation
dc.typeworking paper*
dspace.entity.typePublication
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