Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/261012 
Year of Publication: 
2019
Series/Report no.: 
Working Paper No. 2019-06
Publisher: 
The University of Utah, Department of Economics, Salt Lake City, UT
Abstract: 
We propose a multivariate simultaneous unobserved components framework to determine the two-sided interactions between structural trend and cycle innovations. We relax the standard assumption in unobserved components models that trends are only driven by permanent shocks and cycles are only driven by transitory shocks by considering the possible spillover effects between structural innovations. The direction of spillover has a structural interpretation, whose identification is achieved via heteroskedasticity. We provide identifiability conditions and develop an efficient Bayesian MCMC procedure for estimation. Empirical implementations for both Okun's law and the Phillips curve show evidence of significant spillovers between trend and cycle components.
Subjects: 
Unobserved components
Identification via heteroskedasticity
Trends and cycles
Permanent and transitory shocks
State space models
Spillover structural effects
JEL: 
C11
C32
E31
E32
E52
Document Type: 
Working Paper

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