TY - JOUR
T1 - Univariate detrending methods with stochastic trends
AU - Watson, Mark W.
N1 - Funding Information:
*I would like to thank Andy Abel, Olivier Blanchard, Rob Engle, Charles Plosser, Charles Nelson, and Jim Stock for useful comments and discussions. I would also like to thank the National Science Foundation for financial support.
PY - 1986/7
Y1 - 1986/7
N2 - This paper discusses detrending economic time series, when the trend is modelled as a stochastic process. It considers unobserved components models in which the observed series is decomposed into a trend (a random walk with drift) and a residual stationary component. Optimal detrending methods are discussed, as well as problems associated with using these detrended data in regression models. The methods are applied to three time series: GNP, disposable income, and consumption expenditures. The detrended data are used to test a version of the Life Cycle consumption model.
AB - This paper discusses detrending economic time series, when the trend is modelled as a stochastic process. It considers unobserved components models in which the observed series is decomposed into a trend (a random walk with drift) and a residual stationary component. Optimal detrending methods are discussed, as well as problems associated with using these detrended data in regression models. The methods are applied to three time series: GNP, disposable income, and consumption expenditures. The detrended data are used to test a version of the Life Cycle consumption model.
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U2 - 10.1016/0304-3932(86)90054-1
DO - 10.1016/0304-3932(86)90054-1
M3 - Article
AN - SCOPUS:0002980380
SN - 0304-3932
VL - 18
SP - 49
EP - 75
JO - Journal of Monetary Economics
JF - Journal of Monetary Economics
IS - 1
ER -