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Macroeconomics with a Thick Pen

Author

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  • Marc Gronwald
  • Xin Jin

Abstract

This paper introduces two co-movement measures based on the Thick Pen Transform into the macroeconomic literature: the Thick Pen Measure of Association (TPMA) as well as Multi-Thickness Thick Pen Measure of Association (MTTPMA). Both measures are non-parametric, time-varying, and flexible. These methods are used to analyse the co-movement of, first, US long- and short-term interest rates, and, second, growth rates of per capita GDP and consumption. As methodological benchmark, this paper also applies the recently pro-posed measure of long-run covariability. The paper finds, first, the co-movement of all series to be stronger the more long-term the components of the time series are. Second, the co-movement of GDP and consumption growth rates is not only generally higher, it also fluctuates considerably less over time than that of the interest rates. Third, the co-movement of the interest rates is sensitive to choosing how long-term the components are. This is attributable to the different extents to which the interest rates exhibit cyclical behaviour. The benchmark method confirms this pattern of the results.

Suggested Citation

  • Marc Gronwald & Xin Jin, 2023. "Macroeconomics with a Thick Pen," CESifo Working Paper Series 10430, CESifo.
  • Handle: RePEc:ces:ceswps:_10430
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp10430.pdf
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    References listed on IDEAS

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    1. Schüler, Yves S. & Hiebert, Paul P. & Peltonen, Tuomas A., 2020. "Financial cycles: Characterisation and real-time measurement," Journal of International Money and Finance, Elsevier, vol. 100(C).
    2. Fryzlewicz, Piotr & Oh, H. S., 2011. "Thick pen transformation for time series," LSE Research Online Documents on Economics 37663, London School of Economics and Political Science, LSE Library.
    3. Ulrich K. Müller & Mark W. Watson, 2018. "Long†Run Covariability," Econometrica, Econometric Society, vol. 86(3), pages 775-804, May.
    4. Christophe Croux & Mario Forni & Lucrezia Reichlin, 2001. "A Measure Of Comovement For Economic Variables: Theory And Empirics," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 232-241, May.
    5. Lindman, Sebastian & Tuvhag, Tom & Jayasekera, Ranadeva & Uddin, Gazi Salah & Troster, Victor, 2020. "Market Impact on financial market integration: Cross-quantilogram analysis of the global impact of the euro," Journal of Empirical Finance, Elsevier, vol. 56(C), pages 42-73.
    6. Jozef Baruník & Tobias Kley, 2019. "Quantile coherency: A general measure for dependence between cyclical economic variables," The Econometrics Journal, Royal Economic Society, vol. 22(2), pages 131-152.
    7. Jach, Agnieszka, 2017. "International stock market comovement in time and scale outlined with a thick pen," Journal of Empirical Finance, Elsevier, vol. 43(C), pages 115-129.
    8. P. Fryzlewicz & H.‐S. Oh, 2011. "Thick pen transformation for time series," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 73(4), pages 499-529, September.
    9. Papell, David H. & Prodan, Ruxandra, 2020. "Long-run purchasing power parity redux," Journal of International Money and Finance, Elsevier, vol. 109(C).
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    Cited by:

    1. Gronwald, Marc & Jin, Xin, 2024. "Measuring world oil market integration with a Thick Pen," Energy Economics, Elsevier, vol. 130(C).

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    More about this item

    Keywords

    co-movement; macroeconomics; Thick Pen; covariability;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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