Research

The Persistence of Shocks to Macroeconomic Time Series: Some Evidence from Economic Theory

This paper presents new estimates of persistence of shocks to quarterly labor income, monthly Treasury bill yields, and annual real common stock dividends. The authors 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, they 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.

Publication Information
Article Title: The Persistence of Shocks to Macroeconomic Time Series: Some Evidence from Economic Theory
Journal: Journal of Business and Economic Statistics (Apr, 1996)
v. 14, iss. 2, pp. 179-187
Author(s): Cushing, Matthew J;  McGarvey, Mary G
Researcher Information
    
Cushing, Matthew J
Cushing, Matthew J
Professor of Economics
Expertise:
  • Labor Economics
  • Econometrics
  • Macroeconomics
Economics
CoB 525 U
P.O. Box 880489
University of Nebraska-Lincoln
Lincoln, NE 68588-0489, USA
Phone: (402) 472-2323
Fax: (402) 472-9700
mcushing1@unl.edu
McGarvey, Mary G
McGarvey, Mary G
Associate Professor of Economics
Expertise:
  • Applied Econometrics
  • Public Policy Analysis
  • Economics of Obesity
  • Labor Markets
Economics
CoB 525 P
P.O. Box 880489
University of Nebraska-Lincoln
Lincoln, NE 68588-0489, USA
Phone: (402) 472-9415
mmcgarvey1@unl.edu