Band 6, Heft 3

In this paper I review what insights we have gained about economic and financial relationships from the use of wavelets and speculate on what further insights we may gain in the future. Wavelets are treated as a 'lens' that enables the researcher to explore relationships that previously were unobservable.

This paper examines the relative performance of some popular nonlinearity tests when applied to time series generated by Markov switching autoregressive models. The nonlinearity tests considered include RESET-type tests, the Keenan test, the Tsay test, the McLeod—Li test, the BDS test, the White dynamic information matrix test, and the neural network test. Applications to economic time series are also considered.

In this paper we introduce a new common long memory factor model. The model allows to estimate the common persistent component in fractionally cointegrated processes. We find evidence of cobreaking and fractional cointegration in excess nominal money growth and inflation in the euro area, and propose a new core inflation measure which takes into account both features. A comparison with other core inflation measures reveals that the proposed core inflation process is superior in terms of forecasting properties and economic interpretability.

This paper studies the dynamics of lending and deposit rates in two emerging markets in Latin America: Colombia and Mexico. The dynamics of lending (deposit) interest rates are driven by the exogenous interbank interest rate and deviations from the long-run lending-interbank (deposit-interbank) interest rate relationship. Allowing for different interest rate behavior during periods characterized by large and small values of the spread, the non-linear specification proves superior to the linear one.

This note corrects some typographical errors in my earlier manuscript.