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Nelson-Plosser Revisited: the ACF Approach

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  • Karim Abadir
  • Giovanni Caggiano
  • Gabriel Talmain

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.

Suggested Citation

  • Karim Abadir & Giovanni Caggiano & Gabriel Talmain, 2005. "Nelson-Plosser Revisited: the ACF Approach," Working Papers 2005_7, Business School - Economics, University of Glasgow.
    • Handle: RePEc:gla:glaewp:2005_7
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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. Theodore Panagiotidis & Gianluigi Pelloni, 2014. "Asymmetry and Lilien’s Sectoral Shifts Hypothesis: A Quantile Regression Approach," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 6(1), pages 68-86, June.
    3. Gilles De Truchis & Florent Dubois, 2014. "Unbalanced Fractional Cointegration and the No-Arbitrage Condition on Commodity Markets," Working Papers halshs-01065775, HAL.
    4. Karim M. Abadir, 2011. "Is the economic crisis over (and out)?," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 3(2), pages 102-108, October.
    5. Efrem Castelnuovo, 2016. "Monetary policy shocks and Cholesky VARs: an assessment for the Euro area," Empirical Economics, Springer, vol. 50(2), pages 383-414, March.
    6. 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.
    7. repec:bla:ecinqu:v:55:y:2017:i:1:p:501-526 is not listed on IDEAS
    8. Rangan Gupta & Chi Keung Marco Lau & Mark E. Wohar, 2016. "The Impact of US Uncertainty on the Euro Area in Good and Bad Times: Evidence from a Quantile Structural Vector Autoregressive Model," Working Papers 201681, University of Pretoria, Department of Economics.
    9. Dimitrios Bakas & Theodore Panagiotidis & Gianluigi Pelloni, 2017. "Regional And Sectoral Evidence Of The Macroeconomic Effects Of Labor Reallocation: A Panel Data Analysis," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 501-526, January.
    10. Abadir, Karim & Talmain, Gabriel, 2005. "Distilling co-movements from persistent macro and financial series," Working Paper Series 525, European Central Bank.
    11. 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.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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