Presence of Hysteresis in Real Gross Domestic Product and Resulting Model Effects
Research Mentor(s)
Noguchi, Kimihiro
Description
In macroeconomics, hysteresis is said to exist when the current state (of an economy) has a persistent effect on the future states. In other words, the presence of hysteresis in macroeconomic models implies that economic events could dramatically change the long-run outlook of the economy. Mathematically speaking, the presence of hysteresis implies a difference stationary process, a type of non-stationary process. By showing that the log-transformed US Real Gross Domestic Product (RGDP) is difference stationary, we demonstrate empirical evidence of hysteresis in RGDP and discuss its rationale in light of Keynesian macroeconomic theory. Furthermore, we model the log-transformed RGDP using a classical autoregressive integrated moving average (ARIMA) model and consider the possibility of making reliable short-and long-term RGDP forecasts.
Document Type
Event
Start Date
18-5-2020 12:00 AM
End Date
22-5-2020 12:00 AM
Department
Mathematics
Genre/Form
student projects, posters
Subjects – Topical (LCSH)
Hysteresis (Economics)--Econometric models; Fiscal policy
Type
Image
Rights
Copying of this document in whole or in part is allowable only for scholarly purposes. It is understood, however, that any copying or publication of this document for commercial purposes, or for financial gain, shall not be allowed without the author’s written permission.
Language
English
Format
application/pdf
Presence of Hysteresis in Real Gross Domestic Product and Resulting Model Effects
In macroeconomics, hysteresis is said to exist when the current state (of an economy) has a persistent effect on the future states. In other words, the presence of hysteresis in macroeconomic models implies that economic events could dramatically change the long-run outlook of the economy. Mathematically speaking, the presence of hysteresis implies a difference stationary process, a type of non-stationary process. By showing that the log-transformed US Real Gross Domestic Product (RGDP) is difference stationary, we demonstrate empirical evidence of hysteresis in RGDP and discuss its rationale in light of Keynesian macroeconomic theory. Furthermore, we model the log-transformed RGDP using a classical autoregressive integrated moving average (ARIMA) model and consider the possibility of making reliable short-and long-term RGDP forecasts.