TY  - CHAP
U1  - Buchbeitrag
A1  - Herzog, Bodo
ED  - Terzioğlu, Mehmet Kenan
ED  - Djurovic, Gordana
T1  - Modeling inflation dynamics with fractional Brownian motions and Lévy processes
T2  - Linear and non-linear financial econometrics - theory and practice
N2  - The article studies a novel approach of inflation modeling in economics. We utilize a stochastic differential equation (SDE) of the form dXt=aXtdt+bXtdBtH, where dBtH 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.
KW  - inflation
KW  - dynamics
KW  - modeling
KW  - stochastic differential equation
KW  - fractional Brownian motion
KW  - Lévy process
KW  - jump-diffusion
Y1  - 2020
UN  - https://nbn-resolving.org/urn:nbn:de:bsz:rt2-opus4-28761
U6  - https://doi.org/10.5772/intechopen.92292
DO  - https://doi.org/10.5772/intechopen.92292
SP  - 1
EP  - 12
S1  - 12
PB  - IntechOpen
CY  - London
ER  -