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Article: The Relationships between permanent and transitory movements in U.S. output and the unemployment rate.
- Article from:
- Journal of Money, Credit & Banking
- Article date:
- March 1, 2009
- Author:
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MANY MACROECONOMIC TIME series can usefully be decomposed into two unobserved components. One unobserved component reflects permanent, or trend, movements in the series, while the other captures transitory movements in the series. There may exist important relationships between the unobserved components of two or more different macroeconomic variables. For example, Okun's Law (Okun 1962) suggests that output and the unemployment rate are related. This paper therefore investigates the relationships between the permanent and transitory movements in U.S. output and the unemployment rate using a bivariate correlated unobserved components model.
The results shed light ...