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Estimating Sectoral Cycles Using Cointegration and Common Features

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  • Robert F. Engle
  • Joao Victor Issler

Abstract

This paper investigates the degree of short run and long run comovement in U.S. sectoral output data by estimating sectoral trends and cycles. A theoretical model based on Long and Plosser (1983) is used to derive a reduced form for sectoral output from first principles. Cointegration and common features (cycles) tests are performed and sectoral output data seem to share a relatively high number of common trends and a relatively low number of common cycles. A special trend-cycle decomposition of the data set is performed and the results indicate a very similar cyclical behavior across sectors and a very different behavior for trends. In a variance decomposition exercise, for prominent sectors such as Manufacturing and Wholesale/Retail Trade, the cyclical innovation is more important than the trend innovation.

Suggested Citation

  • Robert F. Engle & Joao Victor Issler, 1993. "Estimating Sectoral Cycles Using Cointegration and Common Features," NBER Working Papers 4529, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4529
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    Cited by:

    1. Liang, Chyi-Lyi (Kathleen) & Feuz, Dillon M. & Taylor, R. Garth, 1997. "Cointegration Tests of Spatial and Variety Price Linkages in Regional Dry Bean Markets," 1997 Annual Meeting, July 13-16, 1997, Reno\ Sparks, Nevada 35787, Western Agricultural Economics Association.
    2. Issler, Joao Victor & Vahid, Farshid, 2006. "The missing link: using the NBER recession indicator to construct coincident and leading indices of economic activity," Journal of Econometrics, Elsevier, vol. 132(1), pages 281-303, May.
    3. Lucke, Bernd, 1998. "Productivity shocks in a sectoral real business cycle model for West Germany," European Economic Review, Elsevier, vol. 42(2), pages 311-327, February.
    4. Gutierrez, Carlos Enrique Carrasco & Gomes, Fábio Augusto Reis, 2009. "Evidence on Common Features and Business Cycle Synchronization in Mercosur," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 29(1), May.
    5. Chan Swee Lean, 2001. "Empirical tests to discern linkages between construction and other economic sectors in Singapore," Construction Management and Economics, Taylor & Francis Journals, vol. 19(4), pages 355-363.
    6. Calcagnini, Giorgio, 1995. "Common trends and common cycles in international labor productivity," Economics Letters, Elsevier, vol. 48(2), pages 179-184, May.
    7. Issler, Joao Victor & Vahid, Farshid, 2006. "The missing link: using the NBER recession indicator to construct coincident and leading indices of economic activity," Journal of Econometrics, Elsevier, vol. 132(1), pages 281-303, May.
    8. Swee-Lean Chan, 2002. "Responses of selected economic indicators to construction output shocks: the case of Singapore," Construction Management and Economics, Taylor & Francis Journals, vol. 20(6), pages 523-533.

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