Testing for conditional heteroscedasticity in the components of inflation

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dc.contributor.author Broto, Carmen
dc.contributor.author Ruiz, Esther
dc.contributor.other Banco de España
dc.date.accessioned 2010-07-08T07:57:44Z
dc.date.available 2010-07-08T07:57:44Z
dc.date.issued 2008
dc.identifier.uri http://hdl.handle.net/10016/9025
dc.description.abstract In 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.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries Documentos de trabajo
dc.relation.ispartofseries 0812
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.other Leverage effect
dc.subject.other QGARCH
dc.subject.other Seasonality
dc.subject.other Structural time series models
dc.subject.other Unobserved component
dc.title Testing for conditional heteroscedasticity in the components of inflation
dc.type workingPaper
dc.subject.eciencia Estadística
dc.rights.accessRights openAccess
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