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The Sources and Nature of Long-Term Memory in Aggregate Output

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This article examines the stochastic properties of aggregate macroeconomic time series from the standpoint of fractionally integrated models, focusing on the persistence of economic shocks. The authors develop a simple macroeconomic model that exhibits long-range dependence, a consequence of aggregation in the presence of real business cycles. To implement these results empirically, they employ a test for fractionally integrated time series based on the Hurst-Mandelbrot rescaled range. This test is robust to short-range dependence and is applied to quarterly and annual real GDP to determine the sources and nature of long-range dependence in the business cycle.

Suggested citation: Haubrich, Joseph, and Andrew Lo. “The Sources and Nature of Long-Term Memory in Aggregate Output,” Federal Reserve Bank of Cleveland, Economic Review, vol. 37, no. 2, pp. 15-30, 06.01.2001.

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