Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/142556
Authors: 
Proietti, Tommaso
Year of Publication: 
2009
Series/Report no.: 
EERI Research Paper Series 24/2009
Abstract: 
The Beveridge-Nelson decomposition defines the trend component in terms of the eventual forecast function, as the value the series would take if it were on its long-run path. The paper in-troduces the multistep Beveridge-Nelson decomposition, which arises when the forecast function is obtained by the direct autoregressive approach, which optimizes the predictive ability of the AR model at forecast horizons greater than one. We compare our proposal with the standard Beveridge-Nelson decomposition, for which the forecast function is obtained by iterating the one-step-ahead predictions via the chain rule. We illustrate that the multistep Beveridge-Nelson trend is more efficient than the standard one in the presence of model misspecification and we subsequently assess the predictive validity of the extracted transitory component with respect to future growth.
Subjects: 
Trend and Cycle
Forecasting
Filtering
JEL: 
C22
C52
E32
Document Type: 
Working Paper

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