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Shock Persistence and Stochastic Trends in Australian Aggregate Output and Consumption

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  • LUIGI ERMINI

Abstract

The distinction between transitory and permanent shocks is at the centre of the debate on which class of models is best suited to represent economic variables: stationary models around a deterministic trend, or stationary models around a stochastic trend The debate u here focused on the Australian case. It is found that both aggregate output and consumption are characterized by stochastic trends, but without a transitory component This corresponds to a measure of shock persistence equal to one for both variables. For the specific case of aggregate output, this result may be interpreted as indicating the absence of business cycles

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  • Luigi Ermini, 1993. "Shock Persistence and Stochastic Trends in Australian Aggregate Output and Consumption," The Economic Record, The Economic Society of Australia, vol. 69(1), pages 34-43, March.
    • Handle: RePEc:bla:ecorec:v:69:y:1993:i:1:p:34-43
    DOI: 10.1111/j.1475-4932.1993.tb01796.x
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    References listed on IDEAS

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