The Relative Importance of Permanent and Transitory Components: Identi- fication and Some Theoretical Bounds / Danny Quah.

Format:

Book

Author/Creator:

Quah, Danny.

Contributor:

National Bureau of Economic Research.

Series:

Technical Working Paper Series (National Bureau of Economic Research) no. t0106.

NBER technical working paper series no. t0106

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

The Relative Importance of Permanent and Transitory Components

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1991.

Summary:

Much macroeconometric discussion has recently emphasized the economic significance of the size of the permanent component in GNP. Consequently, a large literature has developed that tries to estimate this magnitude measured, essentially, as the spectral density of increments in GNP at frequency zero. This paper shows that unless the permanent component is a random walk this attention has been misplaced: in general, that quantity does not identify the magnitude of the permanent component. Further, by developing bounds on reasonable measures of this magnitude, the paper shows that a random walk specification is biased towards establishing the permanent component as important.

Notes:

Print version record

June 1991.