A key application of long memory time series models concerns inflation.
Long memory implies that shocks have a long-lasting effect.
It may however be that empirical evidence for long memory is caused by neglecting one or more level shifts. Our main findings are that apparent long memory is quite resistant to level shifts, although for a few inflation rates we find that evidence for long memory disappears. P.O. Box 1738, NL-3000 DR Rotterdam, The Netherlands.