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Univariate Unobserved-Component Model with Non-Random Walk Permanent Component

Xu, Zhiwei (2008): Univariate Unobserved-Component Model with Non-Random Walk Permanent Component.

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Abstract

In this note, we revisit the univariate unobserved-component (UC) model of US GDP by relaxing the traditional random-walk assumption of the permanent component. Since our general UC model is unidentified, we investigate the upper bound of the contribution of the transitory component, and find it is dominated by the permanent component.

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