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A multivariate innovations state space Beveridge Nelson decomposition

de Silva, Ashton (2007): A multivariate innovations state space Beveridge Nelson decomposition.

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Abstract

The Beveridge Nelson vector innovation structural time series framework is new formu- lation that decomposes a set of variables into their permanent and temporary components. The framework models inter-series relationships and common features in a simple man- ner. In particular, it is shown that this new speci¯cation is more simple than conventional state space and cointegration approaches. The approach is illustrated using a trivariate data set comprising the GD(N)P of Australia, America and the UK.

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