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

Danny Quah ()

FMG Discussion Papers from Financial Markets Group

Abstract: Much macroeconometric discussion has recently emphasised 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, the paper shows that a random walk specification is biased towards establishing the permanent component as important.

Date: 1991-10
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.lse.ac.uk/fmg/workingPapers/discussionPapers/fmg_pdfs/dp126.pdf (application/pdf)

Related works:
Journal Article: The Relative Importance of Permanent and Transitory Components: Identification and Some Theoretical Bounds (1992)
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:fmg:fmgdps:dp126

Access Statistics for this paper

More papers in FMG Discussion Papers from Financial Markets Group
Bibliographic data for series maintained by The FMG Administration ().