Diffusion of technical change and the decomposition of output into trend and cycle
AbstractIn this paper, the authors argue that modeling the trend component in real GNP as a random walk is inconsistent with its interpretation as productivity growth. As an alternative, they specify the trend as an ARIMA whose impulse response function follows an S-shaped pattern reflecting the process of diffusion of technical change. Such an ARIMA is employed to build and estimate an UCARIMA using U.S. postwar quarterly data. The authors find that their model, although more parsimonious, fits the data equally as well as the standard random walk plus AR(2) cycle. Moreover, their model has a very low cycle/trend variance ratio. Copyright 1994 by The Review of Economic Studies Limited.
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Bibliographic InfoPaper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/10157.
Date of creation: Jan 1994
Date of revision:
Publication status: Published in: The Review of Economic Studies (1994) v.61 n° 1,p.19-30
Other versions of this item:
- Lippi, Marco & Reichlin, Lucrezia, 1994. "Diffusion of Technical Change and the Decomposition of Output into Trend and Cycle," Review of Economic Studies, Wiley Blackwell, vol. 61(1), pages 19-30, January.
- Lippi, Marco & Reichlin, Lucrezia, 1993. "Diffusion of Technical Change and the Decomposition of Output into Trend and Cycle," CEPR Discussion Papers 775, C.E.P.R. Discussion Papers.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
- O49 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other
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