Event Title

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

May 2020

End Date

May 2020

Department

Mathematics

Genre/Form

student projects, posters

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

This document is currently not available here.

Share

COinS
 
May 18th, 9:00 AM May 22nd, 5:00 PM

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.