Long Memory in UK Real GDP, 1851-2013: An ARFIMA-FIGARCH Analysis

Guglielmo Maria Caporale and Marinko Skare

No 1395, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: This paper analyses the long-memory properties of both the conditional mean and variance of UK real GDP over the period 1851-2013 by estimating a multivariate ARFIMA-FIGARCH model (with the unemployment rate and inflation as explanatory variables). The results suggest that this series is non-stationary and non-mean-reverting, the null hypotheses of I(0), I(1) and I(2) being rejected in favour of fractional integration - shocks appear to have permanent effects, and therefore policy actions are required to restore equilibrium. The estimate of the long-memory parameter (1.37) is similar to that reported by Candelon and Gil-Alana (2004), implying that aggregate output is not an I(1) process. The presence of long memory in output volatility (d = 0.80) is also confirmed.

Keywords: ARFIMA-(FI)GARCH; Dual long memory; Volatility; Fractional impulse-response; Unemployment; Inflation (search for similar items in EconPapers)
JEL-codes: B23 C14 C32 C53 C54 (search for similar items in EconPapers)
Pages: 15 p.
Date: 2014
New Economics Papers: this item is included in nep-ets and nep-mac
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Citations: View citations in EconPapers (3)

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