The exact linkage between the Beveridge–Nelson decomposition and other permanent-transitory decompositions

Giacomo Sbrana

Economic Modelling, 2013, vol. 30, issue C, 311-316

Abstract: The econometric literature has recently focused attention on the relationship between the Beveridge–Nelson decomposition and unobserved components processes when decomposing time series into permanent and transitory shocks. This paper shows the existence of an algebraic linkage between reduced and structural forms parameters of some unobserved components processes. Results allow measuring how close standard unobserved components processes and unrestricted ARIMA models are regardless of the number of structural/reduced form parameters. Results are provided when the reduced forms are ARIMA(2,1,2) and ARIMA(0,2,2). For the latter, the exact relation between the Hodrick–Prescott filter and the IMA(2,2) reduced form is also shown.

Keywords: Beveridge–Nelson decomposition; Unobserved components processes; Local linear trend; ARIMA (search for similar items in EconPapers)
JEL-codes: C22 E32 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: The exact linkage between the Beveridge-Nelson decomposition and other permanent-transitory decompositions (2013)
Working Paper: The exact linkage between the Beveridge-Nelson decomposition and other permanent-transitory decompositions (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:30:y:2013:i:c:p:311-316

DOI: 10.1016/j.econmod.2012.09.039

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