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Trend-Cycle Interactions and the Subprime Crisis: Analysis of US and Canadian Output

Max Soloschenko and Enzo Weber

No 470, University of Regensburg Working Papers in Business, Economics and Management Information Systems from University of Regensburg, Department of Economics

Abstract: In the following paper a simultaneous unobserved components model is applied to US and Canadian output data in order to examine the causal structure of trend and cycle shocks and the way it changes over time. The main focus is placed on the analysis of the subprime crisis impact on the trend and cycle components. The structural model is identified by means of heteroscedasticity. During the subprime crisis for both countries we determine the strong increase of the structural trend variance compared to the previous period. This underlines the permanent effect and, thus, structural problems as a potential cause. Moreover, the both components are more volatile in the USA than in Canada. A further similarity between both countries is the complete disappearance of the structural cycle shock volatility.

Keywords: unobserved component; trend; cycle; identification; subprime crisis (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Date: 2012-12
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https://epub.uni-regensburg.de/27032/1/Soloschenko_Weber.pdf (application/pdf)

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Journal Article: Trend-Cycle Interactions and the Subprime Crisis: Analysis of US and Canadian Output (2021) Downloads
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