The Relative Importance of Permanent and Transitory Components: Identification and Some Theoretical Bounds

Danny Quah ()

Econometrica, 1992, vol. 60, issue 1, 107-18

Abstract: 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, this paper shows that a random walk specification is biased toward establishing the permanent component as important. Copyright 1992 by The Econometric Society.

Date: 1992
References: Add references at CitEc
Citations: View citations in EconPapers (125)

Downloads: (external link)
http://links.jstor.org/sici?sici=0012-9682%2819920 ... O%3B2-5&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
Working Paper: The Relative Importance of Permanent and Transitory Components: Identification and Some Theoretical Bounds (1991)
Working Paper: The Relative Importance of Permanent and Transitory Components: Identi- fication and Some Theoretical Bounds (1991)
Working Paper: The Relative Importance of Permanent and Transitory Components: Identification and Some Theoretical Bounds (1988)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecm:emetrp:v:60:y:1992:i:1:p:107-18

Ordering information: This journal article can be ordered from
https://www.economet ... ordering-back-issues

Access Statistics for this article

Econometrica is currently edited by Guido Imbens

More articles in Econometrica from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().