Beveridge Nelson decomposition with Markov switching

Vol: 
18/2006
Author name: 
Low CN
Anderson HM
Snyder R
Year: 
2006
Month: 
July
Abstract: 

This paper considers Beveridge-Nelson decomposition in a context where the permanent and transitory components both follow a Markov switching process. Our approach incorporates Markov switching into a single source of error state-space framework, allowing business cycle asymmetries and regime switches in the longrun multiplier.

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