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Estimating Permanent and Transitory Components of GNP Using Consumption Information
Author(s) -
Elwood S. Kirk
Publication year - 1997
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/j.2325-8012.1997.tb00074.x
Subject(s) - autoregressive model , econometrics , consumption (sociology) , permanent income hypothesis , economics , persistence (discontinuity) , vector autoregression , computer science , macroeconomics , engineering , social science , sociology , market liquidity , geotechnical engineering
This paper estimates permanent and transitory components of GNP using an unobserved components model that incorporates consumption information. Agents that discriminate between permanent and transitory as well as anticipated and unanticipated changes in GNP signal the persistence of a change in GNP by the size of their consumption response. Consumption data have previously been employed to discern permanent and transitory properties of GNP using a vector autoregressive (VAR) model. The unobserved components approach used in this paper has several advantages over the VAR approach and provides new evidence concerning the two components.