Output fluctuations in the G-7: An unobserved components approach

Sinchan Mitra; Tara M. Sinclair

doi:10.1017/S1365100510000647

Output fluctuations in the G-7: An unobserved components approach

Sinchan Mitra
, Tara M. Sinclair^*

^*Corresponding author for this work

Research output: Journal Publication › Article › peer-review

18 Citations (Scopus)

Abstract

This paper proposes a multivariate unobserved-components model to simultaneously decompose the real GDP for each of the G-7 countries into its 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.

Original language	English
Pages (from-to)	396-422
Number of pages	27
Journal	Macroeconomic Dynamics
Volume	16
Issue number	3
DOIs	https://doi.org/10.1017/S1365100510000647
Publication status	Published - Jun 2012
Externally published	Yes

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 8 Decent Work and Economic Growth

Free Keywords

Business Cycles
Correlations
Real GDP
Trend-Cycle Decompositions

ASJC Scopus subject areas

Economics and Econometrics

Access to Document

10.1017/S1365100510000647

Cite this

@article{a7cc8fb72ce4423f8f8a1a0772bf071b,

title = "Output fluctuations in the G-7: An unobserved components approach",

abstract = "This paper proposes a multivariate unobserved-components model to simultaneously decompose the real GDP for each of the G-7 countries into its 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 = "Business Cycles, Correlations, Real GDP, Trend-Cycle Decompositions",

author = "Sinchan Mitra and Sinclair, \{Tara M.\}",

note = "Funding Information: The authors wish to thank Shaghil Ahmed, Cigdem Akin, Gaetano Antinolfi, Tino Berger, Paul Carrillo, Yoosoon Chang, Marcelle Chauvet, Brian Doyle, Shahe Emran, Gerdie Everaert, Steve Fazzari, Etienne Gagnon, Ed Greenberg, Jean Imbs, Juan-Angel Jimenez-Martin, Fred Joutz, Ayhan Kose, James Morley, Chris Otrok, Bruce Petersen, Roberto Sameniego, Herman Stekler, Tatsuma Wada, and Eric Zivot for helpful comments. We also thank the participants in the Applied Time Series Research Group at Washington University in St. Louis; the Macro-International Seminar at George Washington University; the SNDE 2007 meetings in Paris; the SHERPPA seminar at the University of Ghent, Belgium; the CeMENT workshop in New Orleans; the International Finance Seminar at the Federal Reserve Board; the economics seminar at the Universidad Complutense in Madrid; the Macroeconomics Seminar at the University of Munich; the 5th Eurostat Colloquium on Modern Tools for Business Cycle Analysis; and the seminar at the Zentrum f{\"u}r Europ{\"a}ische Wirtschaftsforschung (ZEW) in Mannheim, Germany. We thank Jahangir Hossain, Kavita Patel, Amr Moubarak, Aashna Sinha, and Alex Wong for excellent research assistance. We also thank two anonymous referees for comments that helped improve the paper. Generous support for this project was provided by the Institute for International Economic Policy at the Elliott School of International Affairs (ESIA). All remaining errors are our own. Address correspondence to: Tara M. Sinclair, Department of Economics and ESIA, George Washington University, Washington, DC 20005, USA; e-mail: tsinc@gwu.edu.",

year = "2012",

month = jun,

doi = "10.1017/S1365100510000647",

language = "English",

volume = "16",

pages = "396--422",

journal = "Macroeconomic Dynamics",

issn = "1365-1005",

publisher = "Cambridge University Press",

number = "3",

}

TY - JOUR

T1 - Output fluctuations in the G-7

T2 - An unobserved components approach

AU - Mitra, Sinchan

AU - Sinclair, Tara M.

N1 - Funding Information: The authors wish to thank Shaghil Ahmed, Cigdem Akin, Gaetano Antinolfi, Tino Berger, Paul Carrillo, Yoosoon Chang, Marcelle Chauvet, Brian Doyle, Shahe Emran, Gerdie Everaert, Steve Fazzari, Etienne Gagnon, Ed Greenberg, Jean Imbs, Juan-Angel Jimenez-Martin, Fred Joutz, Ayhan Kose, James Morley, Chris Otrok, Bruce Petersen, Roberto Sameniego, Herman Stekler, Tatsuma Wada, and Eric Zivot for helpful comments. We also thank the participants in the Applied Time Series Research Group at Washington University in St. Louis; the Macro-International Seminar at George Washington University; the SNDE 2007 meetings in Paris; the SHERPPA seminar at the University of Ghent, Belgium; the CeMENT workshop in New Orleans; the International Finance Seminar at the Federal Reserve Board; the economics seminar at the Universidad Complutense in Madrid; the Macroeconomics Seminar at the University of Munich; the 5th Eurostat Colloquium on Modern Tools for Business Cycle Analysis; and the seminar at the Zentrum für Europäische Wirtschaftsforschung (ZEW) in Mannheim, Germany. We thank Jahangir Hossain, Kavita Patel, Amr Moubarak, Aashna Sinha, and Alex Wong for excellent research assistance. We also thank two anonymous referees for comments that helped improve the paper. Generous support for this project was provided by the Institute for International Economic Policy at the Elliott School of International Affairs (ESIA). All remaining errors are our own. Address correspondence to: Tara M. Sinclair, Department of Economics and ESIA, George Washington University, Washington, DC 20005, USA; e-mail: tsinc@gwu.edu.

PY - 2012/6

Y1 - 2012/6

N2 - This paper proposes a multivariate unobserved-components model to simultaneously decompose the real GDP for each of the G-7 countries into its 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.

AB - This paper proposes a multivariate unobserved-components model to simultaneously decompose the real GDP for each of the G-7 countries into its 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.

KW - Business Cycles

KW - Correlations

KW - Real GDP

KW - Trend-Cycle Decompositions

UR - https://www.scopus.com/pages/publications/84861365145

U2 - 10.1017/S1365100510000647

DO - 10.1017/S1365100510000647

M3 - Article

AN - SCOPUS:84861365145

SN - 1365-1005

VL - 16

SP - 396

EP - 422

JO - Macroeconomic Dynamics

JF - Macroeconomic Dynamics

IS - 3

ER -

Output fluctuations in the G-7: An unobserved components approach

Abstract

UN SDGs

Free Keywords

ASJC Scopus subject areas

Access to Document

Other files and links

Fingerprint

Cite this