On the Use of Innovation Correlations to Study Cyclical Co-Movements in GDP and Its Components
Innovation cross correlations are sometimes used as indicators of cyclical co-movements among economic variables. This note shows that care is needed in making inferences about business cycle co-movements between GDP and its components from an innovation cross correlation analysis because of the effect of the national income accounting identity. The point is illustrated with an empirical example from Singapore. [C22, E32]
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Volume (Year): 16 (2002)
Issue (Month): 2 ()
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- Abeysinghe, Tilak, 1994. "Deterministic seasonal models and spurious regressions," Journal of Econometrics, Elsevier, vol. 61(2), pages 259-272, April.
- William Schwert, G., 1979. "Tests of causality : The message in the innovations," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 10(1), pages 55-96, January.
- Lucas, Robert E., 1977. "Understanding business cycles," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 5(1), pages 7-29, January.
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