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Estimating Sectoral Cycles Using Cointegration and Common Features

Robert Engle and João Issler ()

No 4529, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper investigates the degree of short run and long run comovement in U.S. sectoral output data by estimating sectoral 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 and 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. In a variance decomposition exercise, for prominent sectors such as Manufacturing and Wholesale/Retail Trade, the cyclical innovation is more important than the trend innovation.

Date: 1993-11
Note: EFG
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Published as (Published as "Estimating Common Sectoral Cycles") Journal of Monetary Economics, Vol. 35 (1995): 83-113.

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Working Paper: Estimating sectoral cycles using cointegration and common features (1994) Downloads
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