Aggregation and the Long Run Behaviour of Economic Time Series

Gabor Korosi, Laszlo Lovrics and Laszlo Matyas

No 267418, Department of Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: The aggregation problem is a well—known difficulty in macroeconometric modelling. It is frequently assumed in these models that the behaviour of economic agents is uniform. Thus the behaviour of a single agent characterizes the aggregate behaviour of the agents (representative agent). However, there may always be some "outliers", some uncharacteristically behaving agents. Such outliers may well determine the time dynamics of the aggregate time series. The paper presents different Monte Carlo experiments to demonstrate this feature. This phenomenon may have an utmost significance in models assuming the cointegration of the variables.

Keywords: Research; Methods/Statistical; Methods (search for similar items in EconPapers)
Pages: 18
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Persistent link: https://EconPapers.repec.org/RePEc:ags:monebs:267418

DOI: 10.22004/ag.econ.267418

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