How Big Is the Random Walk in GNP?

John Cochrane

Journal of Political Economy, 1988, vol. 96, issue 5, 893-920

Abstract: This paper presents a measure of the persistence of fluctuations in gross national product (GNP) based on the variance of its long differences. That measure finds little long-term persistence in GNP. Previous research on this question found a great deal of persistence in GNP, suggesting models such as a random walk. A reconciliation of this paper's results with previous research shows that conventional criteria for time-series model building can produce misleading estimates of persistence. Copyright 1988 by University of Chicago Press.

Date: 1988
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