Financial modelling Money Time series econometrics Demand
Economic & Social Research Institute
Bond, Derek; Harrison, Michael J.; O'Brien, Edward J. 'Demand for money: a study in testing time series for long memory and nonlinearity'. - Economic & Social Review, Vol. 38, No. 1, Spring, 2007, pp. 1–24, Dublin: Economic & Social Research Institute
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.
Paper delivered at the Twentieth Annual Conference of the Irish Economic Association, Bunclody, Co. Wexford, 2006
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