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Nelson-Plosser Revisited: the ACF Approach

Listed author(s):
  • Karim Abadir
  • Giovanni Caggiano
  • Gabriel Talmain

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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File URL: http://www.gla.ac.uk/media/media_22198_en.pdf
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Paper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2005_7.

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