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

26 Pages Posted: 11 Jan 2018

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

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Date Written: November 15, 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 some degree 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: C220, E320

Suggested Citation

Caporale, Guglielmo Maria and Gil-Alana, Luis A., Trends and Cycles in Macro Series: The Case of US Real GDP (November 15, 2017). CESifo Working Paper Series No. 6728, Available at SSRN: https://ssrn.com/abstract=3099315

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
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United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

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

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Berlin, 10117
Germany

Luis A. Gil-Alana

University of Navarra - Department of Economics ( email )

Campus de Arrosadia
Pamplona, 31006
Spain

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