The sources and nature of long-term memory in the business cycle
This paper examines the stochastic properties of aggregate macroeconomic time series from the standpoint of fractionally integrated models, focusing on the persistence of economic shocks. We develop a simple macroeconomic model that exhibits long-range dependence, a consequence of aggregation in the presence of real business cycles. We then derive the relation between properties of fractionally integrated macroeconomic time series and those of microeconomic data and discuss how fiscal policy may alter the stochastic behavior of the former. To implement these results empirically, we employ a test for fractionally integrated time series based on the Hurst-Mandelbrot rescaled range. This test, which is robust to short-term dependence, is applied to quarterly and annual real GNP to determine the sources and nature of long-term dependence in the business cycle..
|Date of creation:||1991|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.clevelandfed.org/
More information through EDIRC
|Order Information:|| Email: |
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.:
- Singleton, Kenneth J., 1988. "Econometric issues in the analysis of equilibrium business cycle models," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 361-386.
- Campbell, John & Mankiw, Gregory, 1987.
"Are Output Fluctuations Transitory?,"
3122545, Harvard University Department of Economics.
- Paul M Romer, 1999.
"Increasing Returns and Long-Run Growth,"
Levine's Working Paper Archive
2232, David K. Levine.
- Beveridge, Stephen & Nelson, Charles R., 1981. "A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the `business cycle'," Journal of Monetary Economics, Elsevier, vol. 7(2), pages 151-174.
- Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
- Nelson, Charles R & Kang, Heejoon, 1979.
"Spurious Periodicity in Inappropriately Detrended Time Series,"
The Warwick Economics Research Paper Series (TWERPS)
161, University of Warwick, Department of Economics.
- Nelson, Charles R & Kang, Heejoon, 1981. "Spurious Periodicity in Inappropriately Detrended Time Series," Econometrica, Econometric Society, vol. 49(3), pages 741-51, May.
- Sowell, F., 1989. "The Deterministic Trend In Real Gnp," GSIA Working Papers 88-89-60, Carnegie Mellon University, Tepper School of Business.
- Granger, C. W. J., 1980. "Long memory relationships and the aggregation of dynamic models," Journal of Econometrics, Elsevier, vol. 14(2), pages 227-238, October.
- Lo, Andrew W, 1991.
"Long-Term Memory in Stock Market Prices,"
Econometric Society, vol. 59(5), pages 1279-313, September.
- Andrew W. Lo, 1989. "Long-term Memory in Stock Market Prices," NBER Working Papers 2984, National Bureau of Economic Research, Inc.
- Tom Doan, . "RSSTATISTIC: RATS procedure to compute R/S Statistic (classical or Lo's modified)," Statistical Software Components RTS00191, Boston College Department of Economics.
- Lo, Andrew W. (Andrew Wen-Chuan), 1989. "Long-term memory in stock market prices," Working papers 3014-89., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- 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.).
- Peter C.B. Phillips, 1985.
"Time Series Regression with a Unit Root,"
Cowles Foundation Discussion Papers
740R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1986.
- Baxter, Marianne, 1991.
"Approximating suboptimal dynamic equilibria : An Euler equation approach,"
Journal of Monetary Economics,
Elsevier, vol. 28(2), pages 173-200, October.
- Baxter, M., 1988. "Approximating Suboptimal Dynamic Equilibria: An Euler Equation Approach," RCER Working Papers 139, University of Rochester - Center for Economic Research (RCER).
- Greenwood, J. & Huffman, G., 1991.
"Tax Analysis in A Real Business Cycle Model: On Measuring Harberger Triangles and Okun Gaps,"
UWO Department of Economics Working Papers
9103, University of Western Ontario, Department of Economics.
- Greenwood, Jeremy & Huffman, Gregory W., 1991. "Tax analysis in a real-business-cycle model : On measuring Harberger triangles and Okun gaps," Journal of Monetary Economics, Elsevier, vol. 27(2), pages 167-190, April.
- Jeremy Greenwood & Gregory W. Huffman, 1991. "Tax analysis in a real business cycle model: on measuring Harberger triangles and Okun gaps," Staff Report 138, Federal Reserve Bank of Minneapolis.
- Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 893-920, October.
- King, Robert G & Plosser, Charles I & Rebelo, Sergio T, 2002.
"Production, Growth and Business Cycles: Technical Appendix,"
Society for Computational Economics, vol. 20(1-2), pages 87-116, October.
- Stock, James H. & Watson, Mark W., 1986. "Does GNP have a unit root?," Economics Letters, Elsevier, vol. 22(2-3), pages 147-151.
- Newey, Whitney K & West, Kenneth D, 1987.
"A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix,"
Econometric Society, vol. 55(3), pages 703-08, May.
- Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
- Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc.
- Danny Quah, 1987.
"What Do We Learn from Unit Roots in Macroeconomic Time Series?,"
NBER Working Papers
2450, National Bureau of Economic Research, Inc.
- Danny Quah, 1987. "What Do We Learn from Unit Roots in Macroeconomic Time Series?," Working papers 469, Massachusetts Institute of Technology (MIT), Department of Economics.
- Perron, Pierre & Phillips, Peter C. B., 1987.
"Does GNP have a unit root? : A re-evaluation,"
Elsevier, vol. 23(2), pages 139-145.
When requesting a correction, please mention this item's handle: RePEc:fip:fedcwp:9116. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lee Faulhaber)
If references are entirely missing, you can add them using this form.