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Mr. Fabio Scacciavillani

provide a viable way of detecting the presence of bubbles or extraneous influences. Using the ARIMA conventional notation, an ARFIMA model can be expressed as ( 1   −   L ) d A ( L ) x t   =   B ( L ) ε t , where d is a real number and not an integer as in standard time series analysis. An ARFIMA process is covariance stationary when d є (–0.5, 0.5). A formal discussion on Evans’s critique can be introduced by looking at the spectrum of

Mr. Fabio Scacciavillani
This paper is an empirical study of the links between monetary variables and inflation based on Cagan’s equation and its rational expectations solution, when the forcing variable is a fractionally integrated process. As demonstrated by Hamilton and Whiteman, the existence of bubbles and other extraneous influences can be detected only by verifying the difference in the order of integration between the monetary base and the price level series. This paper shows that a fractionally differenced model overcomes Evans’ critique of this test and that chronic inflation is essentially a monetary phenomenon caused by fiscal imbalance.
Mr. Fabio Scacciavillani

fractional (noninteger) orders of integration, in particular, long-memory processes (see McLeod and Hipel (1978) ) whose correlation decays at a geometric rate. 1/ ARFIMA processes can be thought of as a natural extension of the standard time-series models ( Granger and Joyeaux (1980) and Hosking (1981)). A random walk X t , i.e., an ARIMA(0,1,0), is the d-difference of a white noise ε(t) ∽ N(0,σ 2 ), where d = 1. In symbols ∇ X t = ( 1 − L ) X t = ε t where L is the lag

International Monetary Fund. Research Dept.
This paper focuses on the payments system reforms and monetary policy in emerging market economies in Central and Eastern Europe. The reforms in the payments system are viewed as closely interrelated with the development of money and foreign exchange markets and the instruments of monetary policy used by the central banks. The paper shows that although starting from similar origins, there were significant variations in experiences of the countries studied in transforming their payments systems after the start of the reforms toward a market economy, from which certain lessons can be drawn.