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Abstract This study examines the statistical properties required to model the dynamics of both the returns and volatility series of the daily stock market returns in six Gulf Cooperation Council countries, namely Bahrain, Oman, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates, under different financial and economic circumstances. The empirical investigation is conducted using daily data from June 1, 2005 to July 1, 2019. The analysis is conducted using a set of double long-memory specifications with some significant features such as long-range dependencies, asymmetries in conditional variances, non-linearity, and multiple seasonality or time-varying correlations. Our study indicates that the joint dual long-memory process can adequately estimate long-memory dynamics in returns and volatility. The in-sample diagnostic tests as well as out-of-sample forecasting results demonstrate the prevalence of the Autoregressive Fractionally Integrated Moving Average and Hyperbolic Asymmetric Power Autoregressive Conditional Heteroskedasticity modeling process over other competing models in fitting the first and the second conditional moments of the market returns. Moreover, the empirical results show that the proposed model offers an interesting framework to describe the long-range dependence in returns and seasonal persistence to shocks in conditional volatility and strongly support the estimation of dynamic returns that allow for time-varying correlations. A noteworthy finding is that the long-memory dependencies in the conditional variance processes of stock market returns appear important, asymmetric, and differ in their volatility responses to unexpected shocks. Our evidence suggests that these markets are not completely efficient in processing regional news, thus providing a sound alternative for regional portfolio diversification.

The aim of this study is to delve into the intricate the mechanism through which alterations in currency exchange rates give rise to shifts in inflation rates, while taking into careful consideration the country's economic cycle. In order to accomplish this objective, we used a dataset that spanned from 1 January 1999 to 1 July 2023, focusing our analytical lens on three specific geographic areas, namely the Eurozone, the United Kingdom, and Canada. In our pursuit of understanding this complex relationship, we employed the Markov Switching Vector Autoregressive model. Our research outcomes can be succinctly encapsulated as follows: in the initial stages, particularly during phases characterized by robust economic growth, the transmission of exchange rate effects onto inflation levels appeared to exhibit a partial impact across all geographic areas under examination. However, during periods marked by economic downturns, both the United Kingdom and Canada displayed a distinctly more comprehensive transmission of these effects. Moreover, the prevailing projections for the forthcoming time horizon, across all the countries encompassed by our study, strongly indicate the onset of an expansionary phase that is projected to extend over a span of 25 months. Lastly, concerning the implications of unexpected disturbances or shocks, it is noteworthy that the response of exchange rates to inflation induced shocks was neither immediate nor as pronounced as the corresponding reaction of inflation to sudden shifts in exchange rates. [ABSTRACT FROM AUTHOR]