Long run and cyclical strong dependence in macroeconomic time series. Nelson and Plosser revisited
This paper deals with the presence of long range dependence at the long run and the cyclical frequencies in macroeconomic time series. We use a procedure that allows us to test unit roots with fractional orders of integration in raw time series. The tests are applied to an extended version of Nelson and Plosser's (1982) dataset, and the results show that, though the classic unit root hypothesis cannot be rejected in most of the series, fractional degrees of integration at both the zero and the cyclical frequencies are plausible alternatives in some cases. Additionally, the root at the zero frequency seems to be more important than the cyclical one for all series, implying that shocks affecting the long run are more persistent than those affecting the cyclical part. The results are consistent with the empirical fact observed in many macroeconomic series that the long-term evolution is nonstationary, while the cyclical component is stationary.
|Date of creation:||03 Dec 2006|
|Publication status:||Published in Empirica 34, 2, 139-154 (2007)|
|Contact details of provider:|| Web page: http://www.unav.edu/web/facultad-de-ciencias-economicas-y-empresariales|
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- Diebold, Francis X. & Rudebusch, Glenn D., 1989. "Long memory and persistence in aggregate output," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 189-209, September.
- Canova, Fabio, 1998. "Detrending and business cycle facts," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 475-512, May.
- Crato, Nuno & Rothman, Philip, 1994. "Fractional integration analysis of long-run behavior for US macroeconomic time series," Economics Letters, Elsevier, vol. 45(3), pages 287-291.
- Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
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