Palgrave Handbook of Econometrics: Applied Econometrics

432 Structural Time Series Models Kuttner, K.N. (1994) Estimating potential output as a latent variable.Journal of Business and ...

Tommaso Proietti 433 Proietti, T. and A. Musso (2007) Growth accounting for the euro area: a structural approach. ECB Working Pa ...

10 Fractional Integration and Cointegration: An Overview and an Empirical Application Luis A. Gil-Alana and Javier Hualde Abstra ...

Luis A. Gil-Alana and Javier Hualde 435 Until the 1980s a standard approach was to impose a deterministic (linear or quadratic) ...

436 Fractional Integration and Cointegration 10.2 Fractional integration 10.2.1 Concept and modelization The idea of fractional ...

Luis A. Gil-Alana and Javier Hualde 437 Sherman (1997) and Chambers (1998) also use aggregation to motivate long mem- ory proces ...

438 Fractional Integration and Cointegration expressed in terms of the Gegenbauer polynomial such that, for alld=0, and setting ...

Luis A. Gil-Alana and Javier Hualde 439 series have a typical shape where by the spectral density increases dramatically as the ...

440 Fractional Integration and Cointegration Other variables, such as consumption and income, have been analyzed from a fraction ...

Luis A. Gil-Alana and Javier Hualde 441 the majority of countries, the fractional differencing parameter lies between 0 and 1, a ...

442 Fractional Integration and Cointegration that a fractional model could be more appropriate than standard ARIMAs. Advan- tage ...

Luis A. Gil-Alana and Javier Hualde 443 To be fair, the idea of equilibrium betweenI( 1 )processes was hinted at long before in ...

444 Fractional Integration and Cointegration ensures thatxthas finite variance, and implies thatxt=0,t≤0. This restriction is un ...

Luis A. Gil-Alana and Javier Hualde 445 also a particular case of the fractional setting proposed by Jeganathan (1999, 2001). Th ...

446 Fractional Integration and Cointegration Finally, Johansen (2008) proposes a new vector autoregressive model: dzt=αβ′d−bLb ...

Luis A. Gil-Alana and Javier Hualde 447 and (cross-) periodogram: wξ(λ)= 1 √ 2 πn ∑n t= 1 ξteitλ, Iξζ(λ)=wξ(λ)w′ζ(−λ), Iξ(λ)=Iξξ ...

448 Fractional Integration and Cointegration estimator of Phillips and Hansen (1990), assuming knowledge ofγandδ. Kim and Philli ...

Luis A. Gil-Alana and Javier Hualde 449 is generated by a vector autoregressive (VAR) process: ut= ∑p j= 1 Bjut−j+εt, and defini ...

450 Fractional Integration and Cointegration a higher rate of convergence is achieved and the limiting distribution is normal, w ...

Luis A. Gil-Alana and Javier Hualde 451 10.3.3.1 Applications to exchange rates The initial applications of the concept of fract ...