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Stochastic trends, deterministic trends, and business cycle turning points

✍ Scribed by Stephen Gordon

Publisher
John Wiley and Sons
Year
1997
Tongue
English
Weight
247 KB
Volume
12
Category
Article
ISSN
0883-7252

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✦ Synopsis

This study examines the relationship between speci®cations for long-run output patterns and speci®cations for business cycle dynamics. In an application to US GDP, it is found that inferences about the nature of the trend in output are not robust to changes in the speci®cation for short-run ¯uctuations. Similarly, the choice of which model best describes the transitory movements in output depends on the way in which the trend is speci®ed. The empirical analysis makes use of Bayesian methods to compare time series models for US GDP. Inspection of the predictive densities for the individual data points suggests that the information contained in the data is largely limited to the observations associated with business cycle turning points.

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