Interpolating flow and stock variables in a continuous-time dynamic framework

Abstract

A continuous-time dynamic interpolation method for deriving high-frequency data is illustrated by deriving monthly data from quarterly data on two US macroeconomic variables: industrial production as a flow variable and the money supply as a stock variable. Analysis of the actual and interpolated series shows that they do not differ significantly in terms of the basic statistics and that they are cointegrated with a cointegarting vector of (–1,0,1). Unlike other interpolation methods, this method distinguishes between stock and flow variables.

Keywords:

• interpolation
• continuous-time dynamic models
• cointegration
• stock variables
• flow variables

JEL Classification:

• C10
• C82