Information, Forecasts and Measurement of the Business Cycle

George Evans and Lucrezia Reichlin

No 756, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The Beveridge-Nelson (BN) technique provides a forecast-based method of decomposing a variable such as output, into trend and cycle when the variable is integrated of order one (I (1)). This paper considers the multivariate generalization of the BN decomposition when the information set includes other I (1) and/or stationary variables. We show that the relative importance of the cyclical component depends on the information set, and in particular that multivariate BN decompositions necessarily ascribe more importance to the cyclical component than does the univariate decomposition, provided the information set includes a variable which Granger-causes output. We illustrate the results for post-war data for the United States.

Keywords: Business Cycles; Cycle; Forecast; Granger Casuality; Information; Integrated Series; Trend (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Date: 1993-01
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Information, forecasts, and measurement of the business cycle (1994)
Working Paper: Information, forecasts and measurement of the business cycle (1994)
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