Nelson-Plosser Revisited: the ACF Approach

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Nelson-Plosser Revisited: the ACF Approach

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Karim Abadir
Giovanni Caggiano
Gabriel Talmain

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Abstract

We detect a new stylized fact about the common dynamics of macroeconomic and financial aggregates. The rate of decay of the memory (or persistence) of these series is depicted by their autocorrelation functions (ACFs), and they all fit very closely a parsimonious four-parameter functional form that we present. Not only does our formula fit the data better than the ones that arise from autoregressive models, but it also yields the correct shape of the ACF. This can help policymakers understand the lags with which an economy evolves, and its turning points.

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Paper provided by Department of Economics, University of Glasgow in its series Working Papers with number 2005_7.

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Date of creation: Jun 2005
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Handle: RePEc:gla:glaewp:2005_7

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-10-22 (All new papers)
NEP-ECM-2005-10-22 (Econometrics)
NEP-ETS-2005-10-22 (Econometric Time Series)
NEP-MAC-2005-10-22 (Macroeconomics)

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Giovanni Caggiano & Efrem Castelnuovo, 2008. "Long Memory and Non-Linearities in International Inflation," "Marco Fanno" Working Papers 0076, Dipartimento di Scienze Economiche "Marco Fanno". [Downloadable!]
Karim Abadir & Gabriel Talmain, 2005. "Distilling co-movements from persistent macro and financial series," Working Paper Series 525, European Central Bank. [Downloadable!]

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