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

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

No 21/04, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: A well known property of the Beveridge Nelson decomposition is that the innovations in the permanent and transitory components are perfectly correlated. We use a single source of error state space model to exploit this property and perform a Beveridge Nelson decomposition. The single source of error state space approach to the decomposition is computationally simple, and in contrast to other methods of performing the Beveridge-Nelson decomposition, it incorporates the direct estimation of the long-run multiplier.

Keywords: Beveridge Nelson decomposition; Long-run multiplier; Single source of error; State-space models. (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-ecm and nep-ets
Date: 2004-11
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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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