Long Memory Processes - an Economist's Viewpoint
by
Clive W. J. Granger
Department of Economics, University of California, San Diego, USA

A long-memory linear process is defined by its possession of a particular feature: its spectrum is unbounded above at zero frequency. Several processes have this property including the fractional integrated process I(d). Attempts to extend these ideas into nonlinear situations have required a new definition of I(0) and results for transformation of random walks and of I(d) processes, both theoretical and from simulations. The results obtained have sometimes been rather unexpected.

From an economists viewpoint the pragmatic usefulness of the models has to be questioned and the I(d) process is found to be defective in many economic examples, a break process seeming to be preferred.

Date received: August 15, 2001