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The Beveridge–Nelson Decomposition: A Different Perspective with New Results
Author(s) -
Gomez Victor,
Breitung Jorg
Publication year - 1999
Publication title -
journal of time series analysis
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.576
H-Index - 54
eISSN - 1467-9892
pISSN - 0143-9782
DOI - 10.1111/1467-9892.00154
Subject(s) - mathematics , autoregressive model , decomposition , perspective (graphical) , fraction (chemistry) , econometrics , order (exchange) , economics , finance , ecology , chemistry , geometry , organic chemistry , biology
We show that the decomposition proposed by Beveridge and Nelson ( J. Monet. Econ. 7 (1981), 151–74) for models that are integrated of order 1 can be generalized to seasonal autoregressive integrated moving‐average models by means of a partial fraction decomposition. An algorithm which is very fast and easy to implement is proposed to optimally (in the mean squared sense) compute the estimates of the components in the generalized decomposition.