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Why are Bayesian trend-cycle decompositions of US real GDP so different?

Author

Listed:
  • Jaeho Kim

    (University of Oklahoma)

  • Sora Chon

    (KDI)

Abstract

This paper provides an underlying reason for why recent Bayesian trend-cycle decompositions of US real GDP differ despite using identical unobserved components models. We stress that a pitfall in estimating unobserved components models accounts for the divergence in the empirical conclusions. Our results also show that the decline in the long-run growth rate of real GDP has been slow and gradual rather than abrupt during the post-World War II period.

Suggested Citation

  • Jaeho Kim & Sora Chon, 2020. "Why are Bayesian trend-cycle decompositions of US real GDP so different?," Empirical Economics, Springer, vol. 58(3), pages 1339-1354, March.
    • Handle: RePEc:spr:empeco:v:58:y:2020:i:3:d:10.1007_s00181-018-1554-0
    DOI: 10.1007/s00181-018-1554-0
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    References listed on IDEAS

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    1. Perron, Pierre & Wada, Tatsuma, 2009. "Let's take a break: Trends and cycles in US real GDP," Journal of Monetary Economics, Elsevier, vol. 56(6), pages 749-765, September.
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    3. 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.
    4. Angelia L. Grant & Joshua C.C. Chan, 2017. "A Bayesian Model Comparison for Trend‐Cycle Decompositions of Output," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(2-3), pages 525-552, March.
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    Cited by:

    1. Manuel González-Astudillo & John M. Roberts, 2022. "When are trend–cycle decompositions of GDP reliable?," Empirical Economics, Springer, vol. 62(5), pages 2417-2460, May.

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    More about this item

    Keywords

    Trend-cycle decomposition; Unobserved components model; Structural break; Gibbs sampling;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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