A fractal comparison of real and Austrian business cycle models

Robert F. Mulligan

Physica A: Statistical Mechanics and its Applications, 2010, vol. 389, issue 11, 2244-2267

Abstract: Rescaled range and power spectral density analysis are applied to examine a diverse set of macromonetary data for fractal character and stochastic dependence. Fractal statistics are used to evaluate two competing models of the business cycle, Austrian business cycle theory and real business cycle theory. Strong evidence is found for antipersistent stochastic dependence in transactions money (M1) and components of the monetary aggregates most directly concerned with transactions, which suggests an activist monetary policy. Savings assets exhibit persistent long memory, as do those monetary aggregates which include savings assets, such as savings money (M2), M2 minus small time deposits, and money of zero maturity (MZM). Virtually all measures of economic activity display antipersistence, and this finding is invariant to whether the measures are adjusted for inflation, including real gross domestic product, real consumption expenditures, real fixed private investment, and labor productivity. This strongly disconfirms real business cycle theory.

Keywords: Antipersistence; Macromonetary aggregates; Long memory; Fractal analysis; Hurst exponent; Austrian business cycle model; Real business cycle model (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:389:y:2010:i:11:p:2244-2267

DOI: 10.1016/j.physa.2010.02.006

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