The Multivariate Simultaneous Unobserved Compenents Model and Identification via Heteroskedasticity
Ivan Mendieta-Muñoz and
Working Paper Series, Department of Economics, University of Utah from University of Utah, Department of Economics
We propose a multivariate simultaneous unobserved components framework to determine the two-sided interactions between structural trend and cycle innovations. We relax the standard assumption in unobserved components models that trends are only driven by permanent shocks and cycles are only driven by transitory shocks by considering the possible spillover effects between structural innovations. The direction of spillover has a structural interpretation, whose identification is achieved via heteroskedasticity. We provide identifiability conditions and develop an efficient Bayesian MCMC procedure for estimation. Empirical implementations for both Okun's law and the Phillips curve show evidence of significant spillovers between trend and cycle components.
Keywords: Unobserved components; Identification via heteroskedasticity; Trends and cycles; Permanent and transitory shocks; State space models; Spillover structural effects. JEL Classification: C11; C32; E31; E32; E52 (search for similar items in EconPapers)
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Working Paper: The multivariate simultaneous unobserved components model and identification via heteroskedasticity (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:uta:papers:2019_06
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