The unit root problem: Affinities between ergodicity and stationarity, its practical contradictions for central bank policy, and some consideration of alternatives

Muhammad Ali Nasir, Jamie Morgan

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

The initial focus in this article is the problem of mismatch between policy goals and statistical analysis, based on how data is transformed and processed. This intrinsically raises ontological issues regarding the nature of an economy within which policy is made and to which statistical analysis is applied. These are of general significance to post Keynesians irrespective of the position they take on the specifics of the ergodicity debate. However, they involve some issues that overlap with some aspects of that debate. The problem as posed in this article is specific and involves a practical contradiction regarding central bank policy and the problem of unit roots. The authors then consider some additional ways in which one can go beyond common practice based on the example of Forward Guidance in the United Kingdom and a more institutional approach to post Keynesian analysis.

Original languageEnglish
Pages (from-to)339-363
Number of pages25
JournalJournal of Post Keynesian Economics
Volume41
Issue number3
Early online date10 Apr 2018
DOIs
Publication statusPublished - 10 Apr 2018
Externally publishedYes

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