Shock Persistence and Stochastic Trends in Australian Aggregate Output and Consumption*

Luigi Ermini

The Economic Record, 1993, vol. 69, issue 1, 34-43

Abstract: The distinction between transitory and permanent shocks is at the centre of the debate on which class of models is best suited to represent economic variables: stationary models around a deterministic trend, or stationary models around a stochastic trend The debate u here focused on the Australian case. It is found that both aggregate output and consumption are characterized by stochastic trends, but without a transitory component This corresponds to a measure of shock persistence equal to one for both variables. For the specific case of aggregate output, this result may be interpreted as indicating the absence of business cycles

Date: 1993
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https://doi.org/10.1111/j.1475-4932.1993.tb01796.x

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