Carvalho, V. M., Harvey, A.C. and Trimbur, T.

A note on common cycles, common trends and convergence.

Journal of Business and Economic Statistics

Vol. 25(1) pp. 12-20 (2007)

Abstract: This article compares and contrasts structural time series models and the common features methodology. The way in which trends are handled is highlighted by describing a recent structural time series model that allows convergence to a common growth path. Postsample data are used to test its forecasting performance for income per head in U.S. regions. A test for common cycles is proposed, its asymptotic distribution is given, and small-sample properties are studied by Monte Carlo experiments. Applications are presented, with special attention given to the implications of using higher-order cycles.

Author links: Vasco Carvalho  

Publisher's Link: http://www.jstor.org/stable/27638903