IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v77y1987i2p111-17.html
   My bibliography  Save this article

Permanent and Transitory Components in Macroeconomic Fluctuations

Author

Listed:
  • Campbell, John Y
  • Mankiw, N Gregory

Abstract

Fluctuations in real GNP have traditionally been viewed as transitory deviations from a deterministic time trend. The purpose of this paper is to review some of the recent developments that have led to a new view of output fluctuations and then to provide some additional evidence. Using post-war quarterly data, it is hard to reject the view that real GNP is as persistent as a random walk with drift. We also consider the hypothesis that the recent finding of persistence are due to the failure to distinguish the business cycle from other fluctuations in real GNP. We use the measured unemployment rate to decompose output fluctuations. We find no evidence for the view that business cycle fluctuations are more quickly trend-reverting.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Campbell, John Y & Mankiw, N Gregory, 1987. "Permanent and Transitory Components in Macroeconomic Fluctuations," American Economic Review, American Economic Association, vol. 77(2), pages 111-117, May.
    • Handle: RePEc:aea:aecrev:v:77:y:1987:i:2:p:111-17
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0002-8282%28198705%2977%3A2%3C111%3APATCIM%3E2.0.CO%3B2-U&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Robert J. Barro & Mark Rush, 1980. "Unanticipated Money and Economic Activity," NBER Chapters, in: Rational Expectations and Economic Policy, pages 23-73, National Bureau of Economic Research, Inc.
    3. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    4. Finn Kydland & Edward C. Prescott, 1980. "A Competitive Theory of Fluctuations and the Feasibility and Desirability of Stabilization Policy," NBER Chapters, in: Rational Expectations and Economic Policy, pages 169-198, National Bureau of Economic Research, Inc.
    5. Watson, Mark W., 1986. "Univariate detrending methods with stochastic trends," Journal of Monetary Economics, Elsevier, vol. 18(1), pages 49-75, July.
    6. Peter K. Clark, 1987. "The Cyclical Component of U. S. Economic Activity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(4), pages 797-814.
    7. Blanchard, Olivier J, 1981. "What Is Left of the Multiplier Accelerator?," American Economic Review, American Economic Association, vol. 71(2), pages 150-154, May.
    8. Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 893-920, October.
    9. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Christiano, Lawrence J. & Eichenbaum, Martin, 1990. "Unit roots in real GNP: Do we know, and do we care?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 7-61, January.
    2. Crafts, N. F. R. & Leybourne, S. J. & Mills, T. C., 1988. "Economic Growth In Nineteeth Century Britain: Comparisons With Europe In The Context Of Gerschenkron'S Hypotheses," Economic Research Papers 268342, University of Warwick - Department of Economics.
    3. Perron, Pierre, 1992. "Racines unitaires en macroéconomie : le cas d’une variable," L'Actualité Economique, Société Canadienne de Science Economique, vol. 68(1), pages 325-356, mars et j.
    4. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know about Unit Roots," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 141-220, National Bureau of Economic Research, Inc.
    5. Spencer D. Krane, 2006. "How professional forecasters view shocks to GDP," Working Paper Series WP-06-19, Federal Reserve Bank of Chicago.
    6. Nelson, Charles R., 1988. "Spurious trend and cycle in the state space decomposition of a time series with a unit root," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 475-488.
    7. Robert J. Hodrick, 2020. "An Exploration of Trend-Cycle Decomposition Methodologies in Simulated Data," NBER Working Papers 26750, National Bureau of Economic Research, Inc.
    8. Philip A. Shively, 2001. "Trend-stationary GNP: evidence from a new exact pointwise most powerful invariant unit root test," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(4), pages 537-551.
    9. Cribari-Neto, Francisco, 1996. "On time series econometrics," The Quarterly Review of Economics and Finance, Elsevier, vol. 36(Supplemen), pages 37-60.
    10. Ángel Guillén & Gabriel Rodríguez, 2014. "Trend-cycle decomposition for Peruvian GDP: application of an alternative method," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 23(1), pages 1-44, December.
    11. Bhar, Ramaprasad & Hamori, Shigeyuki, 2004. "Empirical characteristics of the permanent and transitory components of stock return: analysis in a Markov switching heteroscedasticity framework," Economics Letters, Elsevier, vol. 82(2), pages 157-165, February.
    12. Luigi Ermini, 1993. "Shock Persistence and Stochastic Trends in Australian Aggregate Output and Consumption," The Economic Record, The Economic Society of Australia, vol. 69(1), pages 34-43, March.
    13. Spencer D. Krane, 2011. "Professional Forecasters' View of Permanent and Transitory Shocks to GDP," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(1), pages 184-211, January.
    14. Catherine Doz & Guillaume Rabault & Nicolas Sobczak, 1995. "Décomposition tendance-cycle : estimations par des méthodes statistiques univariées," Économie et Prévision, Programme National Persée, vol. 120(4), pages 73-93.
    15. Akdi, Yilmaz & Varlik, Serdar & Berument, M. Hakan, 2020. "Duration of Global Financial Cycles," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 549(C).
    16. Robert Dixon & G.C. Lim, 2004. "Underlying Inflation in Australia: Are the Existing Measures Satisfactory?," The Economic Record, The Economic Society of Australia, vol. 80(251), pages 373-386, December.
    17. Myroslav Pidkuyko, 2014. "Dynamics of Consumption and Dividends over the Business Cycle," CERGE-EI Working Papers wp522, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    18. Quah, Danny, 1992. "The Relative Importance of Permanent and Transitory Components: Identification and Some Theoretical Bounds," Econometrica, Econometric Society, vol. 60(1), pages 107-118, January.
    19. Morana, Claudio, 2024. "A new macro-financial condition index for the euro area," Econometrics and Statistics, Elsevier, vol. 29(C), pages 64-87.
    20. Günes Kamber & James Morley & Benjamin Wong, 2018. "Intuitive and Reliable Estimates of the Output Gap from a Beveridge-Nelson Filter," The Review of Economics and Statistics, MIT Press, vol. 100(3), pages 550-566, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:77:y:1987:i:2:p:111-17. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.