Stochastic Trends and Economic Fluctuations / Robert G. King, Charles I. Plosser, James H. Stock, Mark W. Watson.

Format:

Book

Author/Creator:

King, Robert G.

Contributor:

National Bureau of Economic Research.

Plosser, Charles I.

Stock, James H.

Watson, Mark W.

Series:

Working Paper Series (National Bureau of Economic Research) no. w2229.

NBER working paper series no. w2229

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1987.

Summary:

Recent developments in macroeconomic theory emphasize that transient economic fluctuations can arise as responses to changes in long run factors -- in particular, technological improvements -- rather than short run factors. This contrasts with the view that short run fluctuations and shifts in long run trends are largely unrelated. We examine empirically the effect of shifts in stochastic trends that are common to several macroeconomic series. Using a linear time series model related to a VAR, we consider first a system with GNP, consumption and investment with a single common stochastic trend; we then examine this system augmented by money and prices and an additional stochastic trend. Our results suggest that movements in the "real" stochastic trend account for one-half to two-thirds of the variation in postwar U.S. GNP.

Notes:

Print version record

April 1987.