The Sources and Nature of Long-term Memory in the Business Cycle / Joseph G. Haubrich, Andrew W. Lo.

Format:

Book

Author/Creator:

Haubrich, Joseph G.

Contributor:

National Bureau of Economic Research.

Lo, Andrew W.

Series:

Working Paper Series (National Bureau of Economic Research) no. w2951.

NBER working paper series no. w2951

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1989.

Summary:

This paper examines the stochastic properties of aggregate macroeconomic time series from the standpoint of fractionally integrated models, and focuses on the persistence of economic shocks. We develop a simple macroeconomic model that exhibits long-term dependence, a consequence of aggregation in the presence of real business cycles. We derive the relation between properties of fractionally integrated macroeconomic time series and those of microeconomic data, and discuss how fiscal policy may alter their stochastic behavior. To implement these results empirically, we employ a test for fractionally integrated time series based on the Hurst-Mandelbrot rescaled range. This test is robust to short-term dependence, and is applied to quarterly and annual real GNP to determine the sources and nature of long-term dependence in the business cycle.

Notes:

Print version record

April 1989.