Trends and Cycles in Macro Series: The Case of US Real GDP

27 Pages Posted: 21 Oct 2017

See all articles by Guglielmo Maria Caporale

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance; London South Bank University; CESifo (Center for Economic Studies and Ifo Institute); German Institute for Economic Research (DIW Berlin)

Luis A. Gil-Alana

University of Navarra - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 2017

Abstract

In this paper we propose a new modelling framework for the analysis of macro series that includes both stochastic trends and stochastic cycles in addition to deterministic terms such as linear and non-linear trends. We examine four US macro series, namely annual and quarterly real GDP and GDP per capita. The results indicate that the behaviour of US GDP can be captured accurately by a model incorporating both stochastic trends and stochastic cycles that allows for somedegree of persistence in the data. Both appear to be mean-reverting, although the stochastic trend is nonstationary whilst the cyclical component is stationary, with cycles repeating themselves every 6 – 10 years.

Keywords: GDP, GDP per capita, trends, cycles, long memory, fractional integration

JEL Classification: C22, E32

Suggested Citation

Caporale, Guglielmo Maria and Gil-Alana, Luis A., Trends and Cycles in Macro Series: The Case of US Real GDP (October 2017). DIW Berlin Discussion Paper No. 1695, Available at SSRN: https://ssrn.com/abstract=3056212 or http://dx.doi.org/10.2139/ssrn.3056212

Guglielmo Maria Caporale (Contact Author)

Brunel University London - Department of Economics and Finance ( email )

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London South Bank University ( email )

Centre for Monetary and Financial Economics
London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

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Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Luis A. Gil-Alana

University of Navarra - Department of Economics ( email )

Campus de Arrosadia
Pamplona, 31006
Spain

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