Are trend and cycle innovations uncorrelated? International evidence
AbstractThe zero-correlation restriction for trend and cycle innovations is empirically examined using an international data set. Unlike the result obtained by Morley et al. (2003), a model with zero-correlation restriction is selected for all nine countries. Since the adequacy of zero-correlation restriction depends on the autoregressive (AR) order assumed, an information-criterion-based model-selection method is applied. In this method, first, possible alternative models are considered by changing the AR order and by including or excluding the zero-correlation restriction, and then the best model is selected from among them. Consequently, it is determined on the basis of the selected model whether the zero-correlation restriction should be imposed.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics Letters.
Volume (Year): 14 (2007)
Issue (Month): 12 ()
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- Daisuke Nagakura, 2008.
"How Are Shocks to Trend and Cycle Correlated? A Simple Methodology for Unidentified Unobserved Components Models,"
IMES Discussion Paper Series
08-E-24, Institute for Monetary and Economic Studies, Bank of Japan.
- Daisuke Nagakura, 2011. "How Are Shocks to Trend and Cycle Correlated? A Simple Methodology for Unidentified Unobserved Components Models," Global COE Hi-Stat Discussion Paper Series gd10-172, Institute of Economic Research, Hitotsubashi University.
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