A smooth transition long-memory model

Marcel Aloy 1 , Gilles Dufrénot 2 , Charles Lai Tong 1 , and Anne Peguin-Feissolle 1
  • 1 Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS, GREQAM, Centre de la Charité, 2 rue de la Charité, 13236 Marseille Cedex 02, France
  • 2 Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS, Banque de France and CEPII, GREQAM, Centre de la Charité, 2 rue de la Charité, 13236 Marseille Cedex 02, France
Marcel Aloy, Gilles Dufrénot, Charles Lai Tong and Anne Peguin-Feissolle

Abstract

This paper proposes a new fractional model with a time-varying long-memory parameter. The latter evolves nonlinearly according to a transition variable through a logistic function. We present an LR-Based test that allows to discriminate between the standard fractional model and our model. We further apply a nonlinear least squares estimation method to estimate the long-memory parameter. We present an application to the unemployment rate in the United States from 1948 to 2012.

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