Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152983
Authors: 
Beneš, Jaromír
Vávra, David
Year of Publication: 
2005
Series/Report no.: 
ECB Working Paper 549
Abstract: 
We propose the method of eigenvalue filtering as a new tool to extract time series subcomponents (such as business-cycle or irregular) defined by properties of the underlying eigenvalues. We logically extend the Beveridge-Nelson decomposition of the VAR time-series models focusing on the transient component. We introduce the canonical state-space representation of the VAR models to facilitate this type of analysis. We illustrate the eigenvalue filtering by examining a stylized model of inflation determination estimated on the Czech data.We characterize the estimated components of CPI, WPI and import inflations, together with the real production wage and real output, survey their basic properties, and impose an identification scheme to calculate the structural innovations. We test the results in a simple bootstrap simulation experiment. We find two major areas for further research: first, verifying and improving the robustness of the method, and second, exploring the method’s potential for empirical validation of structural economic models.
Subjects: 
Beveridge-Nelson decomposition
business cycle
eigenvalues
filtering
inflation
time series analysis
JEL: 
C32
E32
Document Type: 
Working Paper

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