Modelling non-linear comovements between time series

The main objective of this paper is to employ a new dynamic model that combines the bivariate noisy Mackey–Glass recently proposed by Kyrtsou and Labys [Kyrtsou, C., Labys, W., 2006. Evi- dence for chaotic dependence between US inflation and commodity prices. Journal of Macroeco- nomics 28(1), 256–266; Kyrtsou, C., Labys, W., 2007. Detecting positive feedback in multivariate time series: the case of metal prices and US inflation. Physica A 377(1), 227–229.] and the BEKK Garch processes. An empirical exercise using the US effective Federal fund rates and 3-month T-Bill rates will show that for specific time periods the comovements between series are due to inherent non-linear deterministic dynamics.