Permanent vs transitory components and economic fundamentals (replication data)

DOI

Any non-stationary series can be decomposed into permanent (or trend) and transitory (or cycle) components. Typically some atheoretic pre-filtering procedure is applied to extract the permanent component. This paper argues that analysis of the fundamental underlying stationary economic processes should instead be central to this process. We present a new derivation of multivariate Beveridge-Nelson permanent and transitory components, whereby the latter can be derived explicitly as a weighting of observable stationary processes. This allows far clearer economic interpretations. Different assumptions on the fundamental stationary processes result in distinctly different results, but this reflects deep economic uncertainty. We illustrate with an example using Garratt et al.'s (2003a) small VECM model of the UK economy.

Identifier
DOI https://doi.org/10.15456/jae.2022319.0711330902
Metadata Access https://www.da-ra.de/oaip/oai?verb=GetRecord&metadataPrefix=oai_dc&identifier=oai:oai.da-ra.de:776086
Provenance
Creator Garratt, Anthony; Robertson, Donald; Wright, Stephen
Publisher ZBW - Leibniz Informationszentrum Wirtschaft
Publication Year 2006
Rights Creative Commons Attribution 4.0 (CC-BY); Download
OpenAccess true
Contact ZBW - Leibniz Informationszentrum Wirtschaft
Representation
Language English
Resource Type Collection
Discipline Economics