Professor of Economics - London Business School
Common and Uncommon Trends and Cycles
Reichlin, L., Lippi, M.
Date Published: 01/04/1994
The paper discusses the concepts of co-movements of macro variables in the short run and the long run when different trend-cycle decompositions are considered. Moreover, it specifies a model for the trend where identification is achieved by imposing restrictions on the shape of the impulse response function to the permanent shock. This is a multivariate generalization of Lippi and Reichlin (1994) where the trend and the cyclical components are easily derived from the estimation of a VAR model. An empirical section illustrates differences in implications between our suggested decomposition and other decompositions widely used in the literature for a bivariate case of cointegrated variables
Reichlin, L., Lippi, M., "Common and uncommon trends and cycles", European Economic Review, Volume 38, Issues 3-4, April 1994, pp. 624-635
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