Estimating sectoral cycles using cointegration and common features

Robert Engle and João Issler

No 232, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: This paper investigates the degree of short run and long run co-movement in U.S. sectoral output data by estimating sectoraI trends and cycles. A theoretical model based on Long and Plosser (1983) is used to derive a reduced form for sectoral output from first principles. Cointegration and common features (cycles) tests are performed; sectoral output data seem to share a relatively high number of common trends and a relatively low number of common cycles. A special trend-cycle decomposition of the data set is performed and the results indicate a very similar cyclical behavior across sectors and a very different behavior for trends. Indeed. sectors cyclical components appear as one. In a variance decomposition analysis, prominent sectors such as Manufacturing and Wholesale/Retail Trade exhibit relatively important transitory shocks.

Date: 1994-03
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Related works:
Working Paper: Estimating Sectoral Cycles Using Cointegration and Common Features (1993)
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:epgewp:232

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