Abstract
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.
| Original language | English |
|---|---|
| Pages (from-to) | 123-125 |
| Number of pages | 3 |
| Journal | Economics Letters |
| Volume | 100 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - 2008 Jul 1 |
| Externally published | Yes |
Keywords
- C22
- C49
- Cycle
- E32
- Impulse response
- Trend
- Unobserved components model
ASJC Scopus subject areas
- Finance
- Economics and Econometrics