Common Trends and Common Cycles in Canadian Sectoral Output
AbstractThe authors examine evidence of long- and short-run co-movement in Canadian sectoral output data. Their framework builds on a vector-error-correction representation that allows them to test for and compute full-information maximum-likelihood estimates of models with codependent cycle restrictions. They find that the seven sectors under consideration contain five common trends and five codependent cycles and use their estimates to obtain a multivariate Beveridge- Nelson decomposition to isolate and compare the common components. A forecast error variance decomposition indicates that some sectors, such as manufacturing and construction, are subject to persistent transitory shocks, whereas other sectors, such as financial services, are not. The authors also find that imposing common feature restrictions leads to a non-trivial gain in the ability to forecast both aggregate and sectoral output. Among the main conclusions is that manufacturing, construction, and the primary sector are the most important sources of business cycle fluctuations for the Canadian economy.
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Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 03-44.
Length: 47 pages
Date of creation: 2003
Date of revision:
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Other versions of this item:
- Christoph Schleicher & Francisco Barillas, 2005. "Common Trends and Common Cycles in Canadian Sectoral Output," Computing in Economics and Finance 2005 214, Society for Computational Economics.
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- 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-2004-01-12 (All new papers)
- NEP-ETS-2004-01-12 (Econometric Time Series)
- NEP-FIN-2004-01-12 (Finance)
- NEP-MAC-2004-01-12 (Macroeconomics)
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- Christoph Schleicher, 2004.
"Codependence in Cointegrated Autoregressive Models,"
Computing in Economics and Finance 2004
286, Society for Computational Economics.
- Christoph Schleicher, 2007. "Codependence in cointegrated autoregressive models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(1), pages 137-159.
- de Silva, Ashton & Hyndman, Rob J. & Snyder, Ralph, 2009.
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Elsevier, vol. 26(5), pages 1067-1074, September.
- de Silva, Ashton, 2007. "A multivariate innovations state space Beveridge Nelson decomposition," MPRA Paper 5431, University Library of Munich, Germany.
- Elizabeth C. Wakerly & Byron G. Scott & James M. Nason, 2004.
"Common trends and common cycles in Canada: who knew so much has been going on?,"
2004-5, Federal Reserve Bank of Atlanta.
- Elizabeth Wakerly & Byron Scott & James Nason, 2006. "Common trends and common cycles in Canada: who knew so much has been going on?," Canadian Journal of Economics, Canadian Economics Association, vol. 39(1), pages 320-347, February.
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