Working Paper: NBER ID: w1162
Authors: Bennett T. McCallum
Abstract: A number of recent studies have attempted to test propositions concerning "long runt" economic relationships by means of frequency-domain time series techniques that concentrate attention on low frequency co-movements of variables.The present paper emphasizes that many of these propositions involve expectational relationships that are not inherently related to specific frequencies or periodicities. Thus the association of low-frequency time series test statistics with long-run economic propositions is not generally warranted. That such an association can be misleading is demonstrated by analysis of examples taken from notable papers by Geweke, Lucas, and Summers.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| expected inflation rate (E31) | interest rates (E43) |
| interest rates (E43) | expected inflation rate (E31) |
| low-frequency estimators (C51) | misrepresentation of Fisher effect (E43) |
| Lucas's approach (Y20) | invalid evidence for Quantity Theory of Money (E41) |
| low-frequency measures (C20) | incorrect conclusions about long-run neutrality (E19) |