Nelson-Plosser revisited: the ACF approach

Karim Abadir (), Gabriel Talmain () and Giovanni Caggiano
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Gabriel Talmain: University of Glasgow, Glasgow, UK

Working Paper Series from Rimini Centre for Economic Analysis

Abstract: We detect a new stylized fact about the common dynamics of macroeconomic and financial aggregates. The rate of decay of the memory of these series is depicted by their Auto-Correlation Functions (ACFs). They all share a common four-parameter functional form that we derive from the dynamics of an RBC model with heterogeneous firms. We find that, not only does our formula fit the data better than the ACFs that arise from autoregressive models, but it also yields the correct shape of the ACF. This can help policymakers understand better the lags with which an economy evolves, and the onset of its turning points. Classification-JEL: JEL E32, E52, E63

New Economics Papers: this item is included in nep-ecm, nep-ets, nep-ifn and nep-mac
Date: 2008-01, Revised 2008-01

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Related works:
Working Paper: Nelson-Plosser Revisited: the ACF Approach (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:rim:rimwps:18-08

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