Nelson–Plosser revisited: The ACF approach

Karim M. Abadir, Giovanni Caggiano and Gabriel Talmain ()

Journal of Econometrics, 2013, vol. 175, issue 1, 22-34

Abstract: We detect a new stylized fact that is common to the dynamics of all macroeconomic series, including financial aggregates. Their Auto-Correlation Functions (ACFs) share a common four-parameter functional form that arises from the dynamics of a general equilibrium model with heterogeneous firms. We find that, not only does our formula fit the data better than the ACFs that arise from auto-regressive and fractionally-integrated models, but it also yields the correct shape of the ACF, thus explaining the lags with which macroeconomic variables evolve and the onset of seemingly-sudden turning points. This finding puts a premium on quick and decisive macroeconomic policy interventions at the first signs of a turning point, in contrast to gradualist approaches.

JEL-codes: C22 E32 E52 E63 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (17)

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Working Paper: Nelson-Plosser revisited: the ACF approach (2008)
Working Paper: Nelson-Plosser Revisited: the ACF Approach (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:175:y:2013:i:1:p:22-34

DOI: 10.1016/j.jeconom.2013.02.006

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