This paper shows that aggregation over heterogeneous firms, which are subject to temporary technology shocks, will lead to long memory and nonlinearities. We start from microfoundations, using standard RBC model of monopolistic competition. We then derive the fundamental intertemporal...

Suppose we have observations ranging over t = 0; 1;... T on real net investment, {In;t} , and on real gross investment, {Ig;t}. We derive a method of calculating the depreciation rate for each of the periods {delta t} , and estimating `the' implied net capital stock {Kt}. We then provide empirical...

We study the optimal choice of quasi-likelihoods for nearly integrated, possibly non-normal, autoregressive models. It turns out that the two most natural candidate criteria, minimum Mean Squared Error (MSE) and maximum power against the unit root null, give rise to different optimal...