International Evidence on the Persistence of Economic Fluctuations

This paper presents new evidence on the persistence of fluctuations in real GNP. Two measures of persistence are estimated non-parametricaFly 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(2J processes. For six Out of seven countries, the results indicate that a 1 percent shock to output should change the on9-run univariate forecast of output by well over 1 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. John Y. Campbell N. Gregory Mankiw Woodrow Wilson School National Bureau of Princeton University Economic Research Princeton, NJ 08544 1050 Massachusetts Ave. Cambridge, MA 02138