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Interpolation and shock persistence of prewar U.S. macroeconomic time series: A reconsideration

Author

Listed:
  • Hashem Dezhbakhsh

    (Department of Economics, Emory University, USA)

  • Daniel Levy

    (Department of Economics, Emory University, USA; Department of Economics, Bar-Ilan University, Israel; Rimini Centre for Economic Analysis; International Centre for Economic Analysis, Wilfrid Laurier University, Canada; International School of Economics, Tbilisi State University, Georgia)

Abstract

The U.S. prewar output series exhibit smaller shock-persistence than postwar-series. Some studies suggest this may be due to linear interpolation used to generate missing prewar data. Monte Carlo simulations that support this view generate large standard-errors, making such inference imprecise. We assess analytically the effect of linear interpolation on a nonstationary process. We find that interpolation indeed reduces shock-persistence, but the interpolated series can still exhibit greater shock-persistence than a pure random walk. Moreover, linear interpolation makes the series periodically nonstationary, with parameters of the data generating process and the length of the interpolation time-segments affecting shock-persistence in conflicting ways.

Suggested Citation

  • Hashem Dezhbakhsh & Daniel Levy, 2022. "Interpolation and shock persistence of prewar U.S. macroeconomic time series: A reconsideration," Working Paper series 22-05, Rimini Centre for Economic Analysis.
    • Handle: RePEc:rim:rimwps:22-05
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Linear Interpolation; Random Walk; Shock-Persistence; Nonstationary series; Periodic nonstationarity; Stationary series; Prewar US Time Series;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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