This thesis extends Kim and Nelson's (1999) plucking model for real GDP to include correlated innovations. The resulting correlated innovations unobserved components (UC) model allows for both asymmetric transitory movements and correlation between the permanent and transitory innovations. Applying the extended model to U.S., Canadian and Australian GDP, I show that the GDP series can be usefully decomposed into a permanent component, a symmetric transitory component, and an additional occasional asymmetric transitory shock. Incorporating correlated innovations in the model changes the allocation of volatility between the permanent and transitory components. For the U.S., correlated innovations were found to be significant and the permanent component accounted for a larger share of the volatility in GDP. For Canada and Australia, correlated innovations were not significant and the fitted model produced smooth permanent component and volatile transitory component estimates. / Graduate
| Identifer | oai:union.ndltd.org:uvic.ca/oai:dspace.library.uvic.ca:1828/4042 |
| Date | 29 June 2012 |
| Creators | Coke, Geoffrey Bryan |
| Contributors | Voss, Graham M. |
| Source Sets | University of Victoria |
| Language | English, English |
| Detected Language | English |
| Type | Thesis |
| Rights | Available to the World Wide Web |
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