Single Source of Error State Space Approach to the Beveridge Nelson Decomposition

Chin Nam Low, Heather M. Anderson and Ralph David Snyder ()

No 242, Econometric Society 2004 Australasian Meetings from Econometric Society

Abstract: The use of the Beveridge Nelson decomposition in macroeconomic analysis involves the truncation and estimation of infinite weighted sums of random variables, whereas the single source of error (SSE) state space approach provides a simple and effective framework that leads to exactly the same decomposition. Thus, although the (SSE) approach was originally developed as a forecasting tool, it can also be used as a macroeconomic tool, providing a straightforward decomposition of the series into trend and cyclical components, and simplifying the calculation of the relative importance of permanent and temporary shocks.

Keywords: Single Source of Error; Beveridge Nelson Decomposition; State-space (search for similar items in EconPapers)
JEL-codes: C22 C51 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ets
Date: 2004-08-11
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Related works:
Working Paper: Single Source of Error State Space Approach to the Beveridge Nelson Decomposition (2004)
Journal Article: Single source of error state space approach to the Beveridge Nelson decomposition (2006)
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