How big is the random walk in macroeconomic time series: Variance ratio tests

Anastasios Malliaris and Jorge L. Urrutia
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Jorge L. Urrutia: Loyola University of Chicago, Chicago, IL 60611, USA

Chapter 2 in Economic Uncertainty, Instabilities and Asset Bubbles:Selected Essays, 2005, pp 9-12 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThe paper applies the Lo and MacKinlay (1988) and Cochrane (1988) variance-ratio test to the data sample used by Nelson and Plosser (1982), who studies the stationarity properties of 14 macroeconomic variables. The results of our empirical tests indicate that the macroeconomic time series have significant random walk components, with the exception of unemployment, real wages, real per capita GNP and industrial production. These results generally agree with those reported earlier by Nelson and Plosser who found that 13 out of 14 macroeconomic variables followed random walk and with Cochrane who, more recently, found that GNP had a small random walk component. The contribution of this paper lies in its use of a very recent methodology to estimate the magnitude of the random walk component of certain macroeconomic time series.

Keywords: Asymptotic Economic Growth; Inflation; Interest Rates; Asset Pricing; Equity Markets; Foreign Currency; Monetary Policy; Crash (search for similar items in EconPapers)
JEL-codes: C58 C73 E31 E37 E43 G12 G17 (search for similar items in EconPapers)
Date: 2005
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Journal Article: How big is the random walks in macroeconomic time series: Variance ratio tests (1990)
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