Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2011:22: Band Spectrum Regressions using Wavelet Analysis

Fredrik N. G. Andersson ()
Additional contact information
Fredrik N. G. Andersson: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: In economics it is common to distinguish between different time horizons (i.e. short run, medium run, and long run). Engle (1974) proposed combining the discrete Fourier transform with a band spectrum regression to estimate models that separates between different time horizons. In this paper we discuss possibilities and challenges using the maximal overlap discrete wavelet transform instead of the Fourier transform when estimating band spectrum regressions.

Keywords: band spectrum regression; wavelet transform; frequency domain; economic modeling

JEL-codes: C14; C32; C51

18 pages, June 29, 2011

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