Random Walks and Non-Linear Paths in Macroeconomic Time Series: Some Evidence and Implications
Franco Bevilacqua () and
Adriaan van Zon ()
Additional contact information
Franco Bevilacqua: MERIT, Maastricht University
Working Papers from Vienna University of Economics and Business Research Group: Growth and Employment in Europe: Sustainability and Competitiveness
This paper investigates whether the inherent non-stationarity of macroeconomic time series is entirely due to a random walk or also to non-linear components. Applying the numerical tools of the analysis of dynamical systems to long time series for the US, we reject the hypothesis that these series are generated solely by a linear stochastic process. Contrary to the Real Business Cycle theory that attributes the irregular behavior of the system to exogenous random factors, we maintain that the fluctuations in the time series we examined cannot be explained only by means of external shocks plugged into linear autoregressive models. A dynamical and non-linear explanation may be useful for the double aim of describing and forecasting more accurately the evolution of the system. Linear growth models that find empirical verification on linear econometric analysis, are therefore seriously called in question. Conversely non-linear dynamical models may enable us to achieve a more complete information about economic phenomena from the same data sets used in the empirical analysis which are in support of Real Business Cycle Theory. We conclude that Real Business Cycle theory and more in general the unit root autoregressive models are an inadequate device for a satisfactory understanding of economic time series. A theoretical approach grounded on non-linear metric methods, may however allow to identify non-linear structures that endogenously generate fluctuations in macroeconomic time series.
Keywords: Random Walks; Real Business Cycle Theory; Chaos (search for similar items in EconPapers)
JEL-codes: C22 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ets
Note: PDF Document
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.wu-wien.ac.at/inst/vw1/gee/papers/gee!wp22.pdf [301 Moved Permanently]--> https://www.wu.ac.at/inst/vw1/gee/papers/gee!wp22.pdf)
Chapter: Random walks and non-linear paths in macroeconomic time series: some evidence and implications (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wiw:wiwgee:geewp22
Access Statistics for this paper
More papers in Working Papers from Vienna University of Economics and Business Research Group: Growth and Employment in Europe: Sustainability and Competitiveness Welthandelsplatz 1, 1020 Vienna, Austria.
Bibliographic data for series maintained by Department of Economics ().