Trend-Cycle Interactions and the Subprime Crisis: Analysis of US and Canadian Output
AbstractIn the following paper a simultaneous unobserved components model is applied to US and Canadian output data in order to examine the causal structure of trend and cycle shocks and the way it changes over time. The main focus is placed on the analysis of the subprime crisis impact on the trend and cycle components. The structural model is identified by means of heteroscedasticity. During the subprime crisis for both countries we determine the strong increase of the structural trend variance compared to the previous period. This underlines the permanent effect and, thus, structural problems as a potential cause. Moreover, the both components are more volatile in the USA than in Canada. A further similarity between both countries is the complete disappearance of the structural cycle shock volatility.
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Bibliographic InfoPaper provided by University of Regensburg, Department of Economics in its series University of Regensburg Working Papers in Business, Economics and Management Information Systems with number 470.
Date of creation: Dec 2012
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unobserved component; trend; cycle; identification; subprime crisis;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-15 (All new papers)
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