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A note on Michelacci and Zaffaroni, long memory, and time series of economic growth

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Author Info

  • B. Verspagen

    (ECIS, Eindhoven University of Technology)

  • G. Silverberg

    (MERIT - Maastricht Economic Research Institute on Innovation and Technology,)

Abstract

In a recent paper in The Journal of Monetary Economics, Michelacci and Zaffaroni (2000)estimate long memory parameters for GDP per capita of 16 OECD countries. In this note weargue that these estimations are questionable for the purposes of clarifying the time seriesproperties of these data (presence of unit roots, mean reversion, long memory) because theauthors a) filter out a deterministic linear-in-logs trend instead of first-differencing in logs,and manipulate the data in other highly questionable ways, b) rely on the semiparametricGeweke and Porter-Hudak (GPH) method as modified by Robinson, which is known to behighly biased in small samples. We re-examine these results using Beran’s nonparametricFGN estimator and Sowell’s exact maximum likelihood ARFIMA estimator. These methodsavoid the small-sample bias and arbitrariness of the cut-off parameters of Robinson’s methodand allow us to control for short memory effects, although the parametric ARFIMA estimatorintroduces specification problems of its own. We also look at the influence of the choice ofsub-periods on the results. Finally, we apply Robinson’s method to our treatment of the dataand show that MZ’s results no longer hold, nor are their cut-off parameter and filteringinsensitivity claims substantiated.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by Eindhoven Center for Innovation Studies (ECIS) in its series Eindhoven Center for Innovation Studies (ECIS) working paper series with number 00.17.

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Date of creation: 2000
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Handle: RePEc:dgr:tuecis:0017

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Web page: http://ecis.ieis.tue.nl/

Related research

Keywords: long memory; economic growth;

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References

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  1. Sowell, Fallaw, 1992. "Maximum likelihood estimation of stationary univariate fractionally integrated time series models," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 165-188.
  2. Michelacci, C. & Zaffaroni, P., 1998. "(Fractional) Beta Convergence," Papers 9803, Centro de Estudios Monetarios Y Financieros-.
  3. Francis X. Diebold & Glenn D. Rudebusch, 1988. "Long memory and persistence in aggregate output," Finance and Economics Discussion Series 7, Board of Governors of the Federal Reserve System (U.S.).
  4. Lo, Andrew W, 1991. "Long-Term Memory in Stock Market Prices," Econometrica, Econometric Society, vol. 59(5), pages 1279-313, September.
  5. Erhard Reschenhofer & Benedikt M. Pötscher & Michael A. Hauser, 1999. "Measuring persistence in aggregate output: ARMA models, fractionally integrated ARMA models and nonparametric procedures," Empirical Economics, Springer, vol. 24(2), pages 243-269.
  6. Joseph G. Haubrich & Andrew W. Lo, . "The Sources and Nature of Long-Term Memory in the Business Cycle," Rodney L. White Center for Financial Research Working Papers 05-89, Wharton School Rodney L. White Center for Financial Research.
  7. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
  8. Baillie, Richard T., 1996. "Long memory processes and fractional integration in econometrics," Journal of Econometrics, Elsevier, vol. 73(1), pages 5-59, July.
  9. Sowell, Fallaw, 1992. "Modeling long-run behavior with the fractional ARIMA model," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 277-302, April.
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Cited by:
  1. Aken, van J.E., 2001. "Management research based on the paradigm of the design sciences: the quest for tested and grounded technological rules," Eindhoven Center for Innovation Studies (ECIS) working paper series 01.11, Eindhoven Center for Innovation Studies (ECIS).
  2. G Caggiano & L Leonida, . "International Output Convergence: Evidence from an AutoCorrelation Function Approach," Working Papers 2006_20, Business School - Economics, University of Glasgow.
  3. Aken, van J., 2001. "Improving the relevance of management research By developing tested and grounded technologiCAL RULES," Eindhoven Center for Innovation Studies (ECIS) working paper series 01.19, Eindhoven Center for Innovation Studies (ECIS).
  4. Guglielmo Maria Caporale & Luis A. Gil-Alana, 2009. "Long Memory in US Real Output per Capita," Discussion Papers of DIW Berlin 891, DIW Berlin, German Institute for Economic Research.

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