Output Fluctuations in the G-7: An Unobserved Components Approach

Tara Sinclair and Sinchan Mitra ()
Additional contact information
Sinchan Mitra: School of Economics, University of Queensland/ Discover Financial Services

Working Papers from The George Washington University, Institute for International Economic Policy

Abstract: This paper contributes to the debate about the relative importance of permanent versus transitory disturbances as sources of variation in output across the G-7 countries. We employ a multivariate unobserved components model to simultaneously decompose the real GDP for each of the G-7 countries into their respective permanent and transitory components. In contrast to much of the related literature, our model allows for explicit interaction between the components both within and across series. This approach thus allows us to distinguish cross-country correlations driven by the relationships between permanent innovations from those between transitory movements. We find that fluctuations in output are primarily due to permanent movements for all of the G-7 countries. We also find that the correlation between the permanent and transitory innovations within each series is significantly negative. With regards to cross- country relationships, we find important idiosyncratic variation in the correlation across different country pairs.

Keywords: Permanent-Transitory Decompositions; Business Cycles; Correlations; Real GDP (search for similar items in EconPapers)
JEL-codes: C32 E32 O57 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2008-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.gwu.edu/~iiep/assets/docs/papers/Sinclair_IIEPWP2008-4.pdf (application/pdf)

Related works:
Journal Article: OUTPUT FLUCTUATIONS IN THE G-7: AN UNOBSERVED COMPONENTS APPROACH (2012)
Working Paper: Output Fluctuations in the G-7: An Unobserved Components Approach
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:gwi:wpaper:2008-04

Access Statistics for this paper

More papers in Working Papers from The George Washington University, Institute for International Economic Policy Contact information at EDIRC.
Bibliographic data for series maintained by Kyle Renner ().