People are concerned about maintaining purchasing power in times of rising inflation. We formulate investment objectives in terms of real wealth, assuming investors derive utility from the number of goods they can buy with their monetary wealth. We derive closed-form solutions for the portfolio...

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. Since such level shifts are not unlikely for inflation,...