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Dufrénot

Publications

Long-Run Determinants of Inflation in WAEMUBook chapterAbdoulaye Diop, Gilles Dufrénot et Gilles Sanon, In: The CFA Franc Zone: Common Currency, Uncommon Challenges, A.M. Guide et G. C. Tsangarides (Eds.), 2008-04, pp. 54-76, International Monetary Fund, 2008

About one-third of countries covered by the IMF's African Department are members of the CFA franc zone. With most other countries moving away from fixed exchange rates, the issue of an adequate policy framework to ensure the sustainability of the CFA franc zone is clearly of interest to policymakers and academics. However, little academic research exists in the public domain. This book aims to fill this void by bringing together work undertaken in the context of intensified regional surveillance and highlighting the current challenges and the main policy requirements if the arrangements are to be carried forward. The book is based on empirical research by a broad group of IMF economists, with contributions from several outside experts.
Changing-regime volatility: a fractionally integrated SETAR modelJournal articleGilles Dufrénot, Dominique Guégan et Anne Péguin-Feissolle, Applied Financial Economics, Volume 18, Issue 7, pp. 519-526, 2008

This article presents a 2-regime SETAR model with different long-memory processes in both regimes. We briefly present the memory properties of this model and propose an estimation method. Such a process is applied to the absolute and squared returns of five stock indices. A comparison to simple ARFIMA models is made using some forecastibility criteria. Our empirical results suggest that our model offers an interesting alternative competing framework to describe the persistent dynamics in modelling the returns.
Explaining the European exchange rates deviations: Long memory or non-linear adjustment?Journal articleGilles Dufrénot, Sandrine Lardic, Laurent Mathieu, Valérie Mignon et Anne Péguin-Feissolle, Journal of International Financial Markets, Institutions and Money, Volume 18, Issue 3, pp. 207-215, 2008

The standard macroeconomic view links the equilibrium level of foreign exchange rates to the state of the macroeconomic fundamentals. Any deviation from the equilibrium level is viewed as temporary since there are forces ensuring quickly mean-reverting dynamics. The aim of this article is to investigate whether the empirical observation of the real exchange rate misalignments in five European countries over the period 1979-1999 was consistent with the hypothesis of temporary deviations from the fundamentals, or whether they must be associated with significant persistent dynamics. We depart from the traditional framework of linear cointegration by using fractional cointegration or non-linear cointegration. Therefore, we will try to discriminate between linear long memory dynamics and non-linear short memory dynamics.
Modelling The Slow Mean-Reversion Of The Central And Eastern European Countries' Real Exchange RatesJournal articleGilles Dufrénot, Elisabeth Grimaud, Eugénie Latil et Valérie Mignon, Manchester School, Volume 76, Issue 1, pp. 21-43, 2008

In this paper we propose a new modelling approach of the exchange rate misalignments in four transition countries: Hungary, Poland, Slovakia and Slovenia. We provide an empirical framework that takes into account two characteristics of these misalignments: while the fundamentals and policies adjust to restore equilibrium towards the long-term exchange rate, there are factors that hinder a fast mean-reverting dynamics. When the exchange rates adjust slowly to their equilibrium long-run values, the standard regressions that assume zero-mean misalignments present some drawbacks and one needs a model that helps to capture the time-varying aspects of the misalignment dynamics. The model proposed in this paper reproduces well the periods of overvaluation and undervaluation observed in the four countries. Copyright © 2008 The Authors; Journal compilation © 2008 Blackwell Publishing Ltd and The University of Manchester.
Macroeconomic policies in the Franc Zone, by David Fielding (Basingstoke: Palgrave Macmillan, 2005, pp. 240)Journal articleGilles Dufrénot, Journal of International Development, Volume 19, Issue 3, pp. 447-448, 2007

No abstract is available for this item.
Persistent misalignments of the European exchange rates: some evidence from non-linear cointegrationJournal articleGilles Dufrénot, Laurent Mathieu, Valérie Mignon et Anne Péguin-Feissolle, Applied Economics, Volume 38, Issue 2, pp. 203-229, 2006

The asymmetric and persistent adjustment of the European real exchange rates is investigated using the framework of non-linear cointegration. The episodes of slow mean-reversion dynamics over the period from 1979 to 1999 are explained. A test of unit root against STAR cointegration is proposed and some complete estimations and stochastic simulations of ESTAR models are presented. The presence of effective non-linear adjustment during the moving of the currencies to their long-run fundamental equilibrium exchange rate value is discussed.
Modelling squared returns using a SETAR model with long-memory dynamicsJournal articleGilles Dufrénot, Dominique Guégan et Anne Péguin-Feissolle, Economics Letters, Volume 86, Issue 2, pp. 237-243, 2005

This paper presents a two-regime SETAR model for the volatility with a long-memory process in the first regime and a short-memory process in the second regime. Persistence properties are studied and estimation methods are proposed. Such a process is applied to stock indices and individual asset prices
Long-memory dynamics in a SETAR model - applications to stock marketsJournal articleGilles Dufrénot, Dominique Guégan et Anne Péguin-Feissolle, Journal of International Financial Markets, Institutions and Money, Volume 15, Issue 5, pp. 391-406, 2005

This paper presents a 2-regime SETAR model with a long-memory process in the first regime and a short-memory process in the second regime. We briefly introduce the properties of this model. Then, methods for locating the threshold parameter are proposed: we determine a plausible value for the threshold and estimate the other parameters of the model conditionally on this threshold value. Such a process is applied to stock indices and individual asset prices. A comparison with simple FARIMA models is made using some forecastibility criteria. Our empirical results suggest that our model offers an interesting alternative competing framework to describe the persistent dynamics in modeling the first two even powers of the returns.
Modeling the French Consumption Function Using SETAR ModelsJournal articleGilles Dufrénot et Valérie Mignon, Economics Bulletin, Volume 3, Issue 20, pp. 1-16, 2004

We provide new estimations on aggregate consumption series in France using the framework of non-stationary threshold models. Most macroeconomists agree with the idea that, since the beginning of the seventies, the saving ratio has evolved irregularly. Such irregularities are usually interpreted as being caused by mispecification problems or measurement errors. We suggest another explanation that strengthens the role played by structural breaks caused by endogenous factors such as habit formation. In this view, we use threshold models (SETAR) to study both the dynamics of short and long term in order to account for the existence of asymmetric effects in the relationship between consumption and some of its determinants. The estimations and forecasts obtained show that the SETAR error correction model leads to better performance than other specifications such as the usual linear error correction model, the quadratic error correction model and the cubic error correction model.
Modelling the misalignments of the Dollar-Sterling real exchange rate: A nonlinear cointegration perspectiveJournal articleGilles Dufrénot, Valérie Mignon et Slim Chaouachi, Economics Bulletin, Volume 3, Issue 19, pp. 1-11, 2004

This paper proposes a comparison of three nonlinear error-correction models to account for the asymmetric and slow adjustment dynamics of the Dollar-Sterling real exchange rate over a long period (1957-2002). We conclude that two NEC models adequately describe the nonlinear mean-reverting mechanism: smooth transition and rational polynomial NEC models.