Working Paper: NBER ID: w2498
Authors: John V. Campbell; N. Gregory Mankiw
Abstract: This paper presents new evidence on the persistence of fluctuations in real GNP. Two measures of persistence are estimated non-parametrically using post-war quarterly data from Canada, France, Germany, Italy, Japan, the United Kingdom. and the United States. These estimates are compared with Monte Carlo results from various AR(2) processes. For six out of seven countries, the results indicate that a 1 percent shock to output should change the long-run univariate forecast of output by well over I percent. Low-order ARM models for output growth are also estimated, and yield similar conclusions. Finally, the persistence in relative outputs of different countries is examined.
Keywords: Economic Fluctuations; Persistence; Real GNP; International Evidence
JEL Codes: E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 1% shock to output (C69) | change in long-run univariate forecast of output (E27) |
| persistence measures for countries (except UK) (O57) | persistence measure for US (C41) |
| persistence of fluctuations in real GNP does not dissipate over five or ten years (E32) | persistence of fluctuations in real GNP is as persistent as a random walk with drift (E32) |
| first autocorrelation of growth rate (US) (N12) | positive (C29) |
| first autocorrelation of growth rate (France, Germany, UK) (N14) | negative (Y70) |