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Output Fluctuations in the G-7: An Unobserved Components Approach
Macroeconomic Dynamics (2010)
  • Sinchan Mitra, The University of Queensland
  • Tara M Sinclair, George Washington University
Abstract

This paper proposes a multivariate unobserved components model to simultaneously decompose the real GDP for each of the G-7 countries into their respective trend and cycle components. In contrast to previous literature, our model allows for explicit correlation between all the contemporaneous trend and cycle shocks. We find that all the G-7 countries have highly variable stochastic permanent components for output, even once we allow for structural breaks. We also find that common restrictions on the correlations between trend and cycle shocks are rejected by the data. In particular, we find that correlations across permanent and transitory shocks are important both within and across countries.

Keywords
  • Trend-Cycle Decompositions,
  • Business Cycles,
  • Correlations,
  • Real GDP
Disciplines
Publication Date
June 14, 2010
Citation Information
Sinchan Mitra and Tara M Sinclair. "Output Fluctuations in the G-7: An Unobserved Components Approach" Macroeconomic Dynamics Vol. Forthcoming (2010)
Available at: http://works.bepress.com/tara_sinclair/5/