Quah, Danny (1991) The relative importance of permanent and transitory components: identification and some theoretical bounds. Financial Markets Group Discussion Papers (126). Financial Markets Group, The London School of Economics and Political Science, London, UK.
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Abstract
Much macroeconometric discussion has recently emphasized 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.
Item Type: | Monograph (Discussion Paper) |
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Official URL: | https://www.fmg.ac.uk/ |
Additional Information: | © 1991 The Author |
Divisions: | Economics |
Subjects: | H Social Sciences > HB Economic Theory |
JEL classification: | E - Macroeconomics and Monetary Economics > E0 - General > E00 - General C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C50 - General |
Date Deposited: | 27 Apr 2007 |
Last Modified: | 16 May 2024 11:16 |
URI: | http://eprints.lse.ac.uk/id/eprint/2333 |
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