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Shock Persistence and Stochastic Trends in Australian Aggregate Output and Consumption*
Author(s) -
ERMINI LUIGI
Publication year - 1993
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.1993.tb01796.x
Subject(s) - aggregate (composite) , shock (circulatory) , consumption (sociology) , econometrics , economics , persistence (discontinuity) , business cycle , macroeconomics , engineering , medicine , social science , materials science , geotechnical engineering , sociology , composite material
The distinction between transitory and permanent shocks is at the centre of the debate on which class of models is best suited to represent economic variables: stationary models around a deterministic trend, or stationary models around a stochastic trend The debate u here focused on the Australian case. It is found that both aggregate output and consumption are characterized by stochastic trends, but without a transitory component This corresponds to a measure of shock persistence equal to one for both variables. For the specific case of aggregate output, this result may be interpreted as indicating the absence of business cycles