[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/h/ito/pchaps/212702.html
   My bibliography  Save this book chapter

Modeling Inflation Dynamics with Fractional Brownian Motions and Lévy Processes

In: Linear and Non-Linear Financial Econometrics -Theory and Practice

Author

Listed:
  • Bodo Herzog
Abstract
The article studies a novel approach of inflation modeling in economics. We utilize a stochastic differential equation (SDE) of the form d X t = a X t dt + b X t d B t H , where d B t H is a fractional Brownian motion in order to model inflationary dynamics. Standard economic models do not capture the stochastic nature of inflation in the Eurozone. Thus, we develop a new stochastic approach and take into consideration fractional Brownian motions as well as Lévy processes. The benefits of those stochastic processes are the modeling of interdependence and jumps, which is equally confirmed by empirical inflation data. The article defines and introduces the rules for stochastic and fractional processes and elucidates the stochastic simulation output.

Suggested Citation

  • Bodo Herzog, 2021. "Modeling Inflation Dynamics with Fractional Brownian Motions and Lévy Processes," Chapters, in: Mehmet Kenan Terzioglu & Gordana Djurovic & Martin M. Bojaj (ed.), Linear and Non-Linear Financial Econometrics -Theory and Practice, IntechOpen.
    • Handle: RePEc:ito:pchaps:212702
    DOI: 10.5772/intechopen.92292
    as

    Download full text from publisher

    File URL: https://www.intechopen.com/chapters/72397
    Download Restriction: no
    File URL: https://libkey.io/10.5772/intechopen.92292?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    inflation; dynamics; modeling; stochastic differential equation; fractional Brownian motion; Lévy process; jump-diffusion;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ito:pchaps:212702. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Slobodan Momcilovic (email available below). General contact details of provider: http://www.intechopen.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.