Fi-break Model of US Inflation Rate: Long-memory, Level Shifts, or Both?

Namwon Hyung and Philip Hans Franses
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Namwon Hyung: University of Seoul

Korean Economic Review, 2006, vol. 22, 83-97

Abstract: This paper presents a new time series model, called the FI-BREAK model, which is used to describe US inflation, and incorporates long moemory and occasional level shifts at a priori unknown locations. It is demonstrated that, even in the presence of such level shifts, the long memory parameter of the FI-BREAK model can be estimated reasonably accurately. For US inflaction, it is found that the proposed mode's in-sample fit and out-of-sample forecasts are superior over those of single-feature models with long memory or level shifts.

Keywords: FI-BREAK; long memory; level shifts; inflation (search for similar items in EconPapers)
JEL-codes: C22 C53 E31 (search for similar items in EconPapers)
Date: 2006
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