Measuring Trend Output: How Useful are the Great Ratios?

45 Pages Posted: 30 Mar 2005

See all articles by Clifford Attfield

Clifford Attfield

University of Bristol - Department of Economics

Jonathan R.W. Temple

Centre for Economic Policy Research (CEPR)

Date Written: December 2004

Abstract

Standard macroeconomic models suggest that the 'great ratios' of consumption to output and investment to output should be stationary. The joint behavior of consumption, investment and output can then be used to measure trend output. We adopt this approach for the USA and UK, and find support for stationarity of the great ratios when structural breaks are taken into account. From the estimated vector error correction models, we extract multivariate estimates of the permanent component in output, and comment on trend growth in the 1980s and the New Economy boom of the 1990s.

Keywords: Trend output, great ratios, structural breaks, permanent components, new economy

JEL Classification: C32, C51, E20, E30

Suggested Citation

Attfield, Clifford and Temple, Jonathan R.W., Measuring Trend Output: How Useful are the Great Ratios? (December 2004). CEPR Discussion Paper No. 4796. Available at SSRN: https://ssrn.com/abstract=694483

Clifford Attfield

University of Bristol - Department of Economics ( email )

8 Woodland Road
Bristol BS8 ITN
United Kingdom
+44 117 928 9000 (Phone)
+44 117 925 1424 (Fax)

Jonathan R.W. Temple (Contact Author)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
26
Abstract Views
879
PlumX Metrics