Johansen, Søren; Lange, Theis - In: Journal of Econometrics 177 (2013) 2, pp. 285-288
The question we discuss is whether a simple random coefficient autoregressive model with infinite variance can create the long swings, or persistence, which are observed in many macroeconomic variables. The model is defined by yt=stρyt−1+εt,t=1,…,n, where st is an i.i.d. binary variable...