Measuring trend output: how useful are the Great Ratios?

Cliff L.F. Attfield and Jonathan Temple

Bristol Economics Discussion Papers from School of Economics, University of Bristol, UK

Abstract: Standard macroeconomic models suggest that the 'great ratios' of consumption to output and investment to output should be stationary. The joint behaviour of consumption, investment and output can then be used to measure trend output. We adopt this approach for the USA and UK, and find support for stationarity of the great ratios when structural breaks are taken into account. From the estimated vector error correction models, we extract multivariate estimates of the permanent component in output, and comment on trend growth in the 1980s and the New Economy boom of the 1990s.

Keywords: Trend output; great ratios; structural breaks; permanent components; New Economy (search for similar items in EconPapers)
JEL-codes: C32 C51 E2 E3 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2003-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published under different title in the Journal of Macroeconomics, 2010.

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Related works:
Working Paper: Measuring Trend Output: How Useful Are the Great Ratios? (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:bri:uobdis:03/555

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