Template-type: ReDIF-Paper 1.0
Author-Name: Karanasos, Menelaos  
Author-Email: menelaos.karanasos@brunel.ac.uk
Author-Name: Paraskevopoulos, Alexandros
Author-Email: alparas@unipi.gr
Author-Name: Magdalinos, Anastasios   
Author-Email: A.Magdalinos@soton.ac.uk 
Author-Name: Canepa, Alessandra    
Author-Email: alessandra.canepa@unito.it
Author-Workplace-Name: University of Turin
Author-Workplace-Homepage: http://www.est.unito.it/
Title: A Unified Theory for Arma Models with Varying Coefficients: One Solution Fits All.
Abstract: A new explicit solution representation is provided for ARMA recursions with drift and either deterministically or stochastically varying coefficients. It is expressed in terms of the determinants of banded Hessenberg matrices and, as such, is an explicit function of the coefficients. In addition to
computational efficiency, the proposed solution provides a more explicit analysis of the fundamental
properties of such processes, including their Wold-Cram´er decomposition, their covariance structure
and their asymptotic stability and efficiency. Explicit formulae for optimal linear forecasts, based
either on finite or infinite sequences of past observations are provided. The practical significance of
the theoretical results in this work is illustrated with an application to U.S. inflation data. The main
finding is that inflation persistence increased after 1976, whereas from 1986 onwards the persistence
declines and stabilizes to even lower levels than the pre-1976 period.
Length: pages 58
Creation-Date: 2024-06
File-URL: https://www.est.unito.it/do/home.pl/Download?doc=/allegati/wp2024dip/wp_13_2024.pdf
File-Format: Application/PDF
Handle: RePEc:uto:dipeco:202413