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Univariate Unobserved-Component Model with Non-Random Walk Permanent Component

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  • Xu, Zhiwei
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    Abstract

    In this note, we revisit the univariate unobserved-component (UC) model of US GDP by relaxing the traditional random-walk assumption of the permanent component. Since our general UC model is unidentified, we investigate the upper bound of the contribution of the transitory component, and find it is dominated by the permanent component.

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    File URL: http://mpra.ub.uni-muenchen.de/12038/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12038.

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    Date of creation: 11 Nov 2008
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    Handle: RePEc:pra:mprapa:12038

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    Keywords: Unobserved-Component Model; Random Walk Assumption; Permanent and Transitory Shocks;

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    1. James C. Morley & Charles R. Nelson & Eric Zivot, 2003. "Why Are the Beveridge-Nelson and Unobserved-Components Decompositions of GDP So Different?," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 235-243, May.
    2. Oh, Kum Hwa & Zivot, Eric & Creal, Drew, 2008. "The relationship between the Beveridge-Nelson decomposition and other permanent-transitory decompositions that are popular in economics," Journal of Econometrics, Elsevier, vol. 146(2), pages 207-219, October.
    3. James Morley & Charles Nelson & Eric Zivot, 2003. "Why are Beveridge-Nelson and Unobserved-component decompositions of GDP so Different?," Working Papers UWEC-2002-18-P, University of Washington, Department of Economics.
    4. Beveridge, Stephen & Nelson, Charles R., 1981. "A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the `business cycle'," Journal of Monetary Economics, Elsevier, vol. 7(2), pages 151-174.
    5. Nagakura, Daisuke, 2008. "A note on the two assumptions of standard unobserved components models," Economics Letters, Elsevier, vol. 100(1), pages 123-125, July.
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