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An Unobserved Components Model that Yields Business and Medium-Run Cycles

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  • JUN MA
  • MARK E. WOHAR

Abstract

We generalize the unobserved components (UC) model to allow the permanent component to have different dynamics than the transitory components when decomposing U.S. economic activity using a multivariate UC model of (log) output, consumption, and investment. We find that these proposed dynamics in the permanent component are statistically significant and distinct from those of the transitory components. Our approach provides an alternative explanation for the growth cycles identified by Comin and Gertler () that is related to the cyclical movements in technology, in a framework consistent with the Beveridge and Nelson () decomposition.
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Suggested Citation

  • Jun Ma & Mark E. Wohar, 2013. "An Unobserved Components Model that Yields Business and Medium-Run Cycles," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(7), pages 1351-1373, October.
    • Handle: RePEc:mcb:jmoncb:v:45:y:2013:i:7:p:1351-1373
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    Cited by:

    1. Han, Yang & Liu, Zehao & Ma, Jun, 2020. "Growth cycles and business cycles of the Chinese economy through the lens of the unobserved components model," China Economic Review, Elsevier, vol. 63(C).
    2. Jing Tian & Jan P.A.M. Jacobs & Denise R. Osborn, 2024. "Multivariate Trend‐Cycle‐Seasonal Decompositions with Correlated Innovations," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 86(5), pages 1260-1289, October.
    3. Xuan, Chunji & Kim, Chang-Jin & Kim, Dong Heon, 2019. "New dynamics of consumption and output," Journal of Macroeconomics, Elsevier, vol. 60(C), pages 50-59.
    4. Koki Kyo & Hideo Noda & Genshiro Kitagawa, 2022. "Co-movement of Cyclical Components Approach to Construct a Coincident Index of Business Cycles," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 18(1), pages 101-127, March.

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