A note on the two assumptions of standard unobserved components models
In this note, I consider a general class of unobserved components (UC) models and derive a relevant inequality. This inequality implies that either of the two assumptions of standard UC models, namely, a random walk trend and uncorrelated shocks, is not satisfied if the impulse response measure introduced by [Campbell, J.Y. and N.G. Mankiw, 1987a. Are output fluctuations transitory? Quarterly Journal of Economics 102, 857-880, Campbell, J.Y. and N.G. Mankiw, 1987b. Permanent and transitory components in macroeconomic fluctuations, American Economic Review (Papers and Proceedings) 77, 111-117] is greater than 1.
Year of publication: |
2008
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Authors: | Nagakura, Daisuke |
Published in: |
Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 100.2008, 1, p. 123-125
|
Publisher: |
Elsevier |
Saved in:
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