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Nelson-Plosser revisited: the ACF approach

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  • Karim M. Abadir

    ()
    (Imperial College London, London, UK and The Rimini Centre for Economic Analysis, Italy)

  • Gabriel Talmain

    ()
    (University of Glasgow, Glasgow, UK)

  • Giovanni Caggiano

    (University of Padua, Italy)

Abstract

We detect a new stylized fact about the common dynamics of macroeconomic and financial aggregates. The rate of decay of the memory of these series is depicted by their Auto-Correlation Functions (ACFs). They all share a common four-parameter functional form that we derive from the dynamics of an RBC model with heterogeneous firms. We find that, not only does our formula fit the data better than the ACFs that arise from autoregressive models, but it also yields the correct shape of the ACF. This can help policymakers understand better the lags with which an economy evolves, and the onset of its turning points. Classification-JEL: JEL E32, E52, E63

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Bibliographic Info

Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 18-08.

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Date of creation: Jan 2008
Date of revision: Jan 2008
Handle: RePEc:rim:rimwps:18-08

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Cited by:
  1. Holmes, Mark J. & Otero, Jesús & Panagiotidis, Theodore, 2013. "Modelling the behaviour of unemployment rates in the US over time and across space," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(22), pages 5711-5722.
  2. Gianluca, MORETTI & Giulio, NICOLETTI, 2008. "Estimating DGSE models with long memory dynamics," Discussion Papers (ECON - Département des Sciences Economiques) 2008037, Université catholique de Louvain, Département des Sciences Economiques.
  3. Karim M. Abadir, 2010. "Is the Economic Crisis Over (and Out)?," Working Paper Series 23_10, The Rimini Centre for Economic Analysis.
  4. Theodore Panagiotidis & Gianluigi Pelloni, 2014. "Asymmetry and Lilien’s Sectoral Shifts Hypothesis: A Quantile Regression Approach," Working Paper Series 15_14, The Rimini Centre for Economic Analysis.
  5. Karim M. Abadir, 2013. "Lies, Damned Lies, and Statistics? Examples From Finance and Economics," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 5(4), pages 231-248, December.
  6. Abadir, Karim & Talmain, Gabriel, 2005. "Distilling co-movements from persistent macro and financial series," Working Paper Series 0525, European Central Bank.
  7. Giovanni Caggiano & Efrem Castelnuovo, 2008. "Long Memory and Non-Linearities in International Inflation," "Marco Fanno" Working Papers 0076, Dipartimento di Scienze Economiche "Marco Fanno".
  8. Caggiano, Giovanni & Castelnuovo, Efrem, 2011. "On the dynamics of international inflation," Economics Letters, Elsevier, vol. 112(2), pages 189-191, August.
  9. Karim M. Abadir & Gabriel Talmain, 2012. "Beyond Co-Integration: Modelling Co-Movements in Macro finance," Working Paper Series 25_12, The Rimini Centre for Economic Analysis.

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