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Further on the Nature of the Australian Business Cycle
Author(s) -
LAYTON ALLAN P.
Publication year - 1994
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.1475-4932.1994.tb01820.x
Subject(s) - shock (circulatory) , business cycle , economics , probabilistic logic , econometrics , variation (astronomy) , path (computing) , series (stratigraphy) , mathematics , macroeconomics , statistics , computer science , physics , geology , medicine , paleontology , astrophysics , programming language
Strong and Tan (1991) found Australian output variation was well characterized by a stochastic trend implying output shocks have a permanent effect on the level of activity. The paper finds that in Australia the stochastic trend alternative is statistically dominated when the data are allowed to be characterized by a probabilistic segmented trend specification. This finding implies shocks will only have a permanent effect on output when the series' growth path switches from one growth regime into another as a result of the shock.