Please use this identifier to cite or link to this item: http://bura.brunel.ac.uk/handle/2438/29700
Title: A UNIFIED THEORY FOR ARMA MODELS WITH VARYING COEFFICIENTS: ONE SOLUTION FITS ALL
Authors: Paraskevopoulos, A
Magdalinos, A
Canepa, A
Keywords: ARMA process;asymptotic stability;Green function;Hessenbergians;nonstationary;structural breaks;time-varying persistence;variable coefficients;Wold decomposition
Issue Date: 27-Feb-2025
Publisher: Cambridge University Press
Citation: Karanasos, M. et al. (2024) 'A UNIFIED THEORY FOR ARMA MODELS WITH VARYING COEFFICIENTS: ONE SOLUTION FITS ALL', Econometric Theory, 0 (ahead of print), pp. 1 - [54]. doi: 10.1017/S0266466624000306.
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–Cramér 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 onward, the persistence declines and stabilizes to even lower levels than the pre-1976 period.
Description: A preprint version of the article is available at: arXiv:2110.06168v1 [math.ST], https://arxiv.org/abs/2110.06168 under a CC BY licence. It has not been certified by peer review.
URI: https://bura.brunel.ac.uk/handle/2438/29700
DOI: https://doi.org/10.1017/S0266466624000306
ISSN: 0266-4666
Other Identifiers: ORCiD: Menelaos Karanasos https://orcid.org/0000-0001-5442-3509
ORCiD; Alessandra Canepa https://orcid.org/0000-0002-1287-3920
arXiv:2110.06168 [math.ST]
Appears in Collections:Dept of Economics and Finance Research Papers

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