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On trend-cycle decomposition and data revision

Author

Listed:
  • Dungey, Mardi
  • Jacobs, Jan
  • Tian, Jing
  • Norden, Simon van

    (Groningen University)

Abstract

A well-documented property of the Beveridge-Nelson trend-cycle decomposition is the perfect negative correlation between trend and cycle innovations. This paper gives a novel explanation for this negative correlation originating from the Jacobs-van Norden (2011) data revision model. Trend shocks may enter the equation for the cycle or cyclical shocks may enter the trend equation. We discuss economic interpretations and implications, including ltering and smoothing properties.We illustrate the idea with simulations based on the Morley, Nelson and Zivot (2003) outcomes

Suggested Citation

  • Dungey, Mardi & Jacobs, Jan & Tian, Jing & Norden, Simon van, 2012. "On trend-cycle decomposition and data revision," Research Report 12009-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    • Handle: RePEc:gro:rugsom:12009-eef
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    File URL: http://hdl.handle.net/11370/2591c28d-1e74-488c-961c-bdf6a97b09c7
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    References listed on IDEAS

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    Cited by:

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    2. Doko Tchatoka, Firmin Sabro, 2012. "Specification Tests with Weak and Invalid Instruments," MPRA Paper 40185, University Library of Munich, Germany.
    3. Firmin Doko Tchatoka & Jean‐Marie Dufour, 2014. "Identification‐robust inference for endogeneity parameters in linear structural models," Econometrics Journal, Royal Economic Society, vol. 17(1), pages 165-187, February.
    4. Mardi Dungey & Matteo Luciani & David Veredas, 2012. "Ranking Systemically Important Financial Institutions," CAMA Working Papers 2012-47, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    5. Firmin Doko Tchatoka, 2015. "On bootstrap validity for specification tests with weak instruments," Econometrics Journal, Royal Economic Society, vol. 18(1), pages 137-146, February.
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