The persistence of shocks to macroeconomic time series: Some evidence from economic theory

Matthew J. Cushing, Mary G. McGarvey

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This article presents new estimates of persistence of shocks to quarterly labor income, monthly treasury-bill yields, and annual real common-stock dividends. We replace orthogonality conditions involving near-unit-root instruments with restrictions on innovation variances implied by a generalized version of the permanent income hypothesis, a term-structure model, and constant-discount-rate efficient-markets model. Conditional on these theories, we obtain precise estimates of persistence without imposing arbitrary restrictions on the magnitude of the largest root. Shocks are more persistent than indicated by unrestricted trend-stationary models but less persistent than implied by unit-root models.

Original languageEnglish (US)
Pages (from-to)179-187
Number of pages9
JournalJournal of Business and Economic Statistics
Volume14
Issue number2
DOIs
StatePublished - Apr 1996

Fingerprint

Macroeconomics
economic theory
Persistence
macroeconomics
time series
persistence
Shock
Time series
Unit Root
Economics
Restriction
evidence
Term Structure
Market Model
Dividend
Discount
Orthogonality
income
Estimate
Annual

Keywords

  • Difference stationary
  • Generalized method of moments
  • Orthogonality condition
  • Permanent value
  • Trend stationary
  • Unit root

ASJC Scopus subject areas

  • Statistics and Probability
  • Social Sciences (miscellaneous)
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty

Cite this

The persistence of shocks to macroeconomic time series : Some evidence from economic theory. / Cushing, Matthew J.; McGarvey, Mary G.

In: Journal of Business and Economic Statistics, Vol. 14, No. 2, 04.1996, p. 179-187.

Research output: Contribution to journalArticle

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