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The Typical Spectral Shape of An Economic Variable: A Visual Guide with 100 Examples

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  • Carlos Medel

Abstract

Granger (1966) describes how the spectral shape of an economic variable concentrates spectral mass at low frequencies, declining smoothly as frequency increases. Despite a discussion about how to assess robustness of his results, the empirical exercise focused on the evidence obtained from a handful of series. In this paper, I focus on a broad range of economic variables to investigate their spectral shape. Hence, through different examples taken from both actual and simulated series, I provide an intuition of the typical spectral shape of a wide range of economic variables and the impact of their typical treatments. After performing 100 different exercises, the results show that Granger's assertion holds more often than not. I also confirm that the basic shape holds for a number of transformations, time aggregations, series' anomalies, variables of the real economy, and also, but to a lesser extent, financial variables. Especially fuzzy cases are those that exhibit some degree of transition to a different regime, as are those estimated with a very short bandwidth.

Suggested Citation

  • Carlos Medel, 2014. "The Typical Spectral Shape of An Economic Variable: A Visual Guide with 100 Examples," Working Papers Central Bank of Chile 719, Central Bank of Chile.
  • Handle: RePEc:chb:bcchwp:719
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    References listed on IDEAS

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    1. Findley, David F, et al, 1998. "New Capabilities and Methods of the X-12-ARIMA Seasonal-Adjustment Program," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(2), pages 127-152, April.
    2. Daniel Levy & Hashem Dezhbakhsh, 2003. "On the typical spectral shape of an economic variable," Applied Economics Letters, Taylor & Francis Journals, vol. 10(7), pages 417-423.
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    JEL classification:

    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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