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On the Use of Innovation Correlations to Study Cyclical Co-Movements in GDP and Its Components

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  • Abeysinghe Tilak
  • Choy Keen

Abstract

Innovation cross correlations are sometimes used as indicators of cyclical co-movements among economic variables. This note shows that care is needed in making inferences about business cycle co-movements between GDP and its components from an innovation cross correlation analysis because of the effect of the national income accounting identity. The point is illustrated with an empirical example from Singapore. [C22, E32]

Suggested Citation

  • Abeysinghe Tilak & Choy Keen, 2002. "On the Use of Innovation Correlations to Study Cyclical Co-Movements in GDP and Its Components," International Economic Journal, Taylor & Francis Journals, vol. 16(2), pages 37-45.
    • Handle: RePEc:taf:intecj:v:16:y:2002:i:2:p:37-45
    DOI: 10.1080/10168730200000012
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    1. William Schwert, G., 1979. "Tests of causality : The message in the innovations," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 10(1), pages 55-96, January.
    2. E. M. R. A. Engel, 1984. "A Unified Approach To The Study Of Sums, Products, Time‐Aggregation And Other Functions Of Arma Processes," Journal of Time Series Analysis, Wiley Blackwell, vol. 5(3), pages 159-171, May.
    3. Abeysinghe, Tilak, 1994. "Deterministic seasonal models and spurious regressions," Journal of Econometrics, Elsevier, vol. 61(2), pages 259-272, April.
    4. Lucas, Robert E., 1977. "Understanding business cycles," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 5(1), pages 7-29, January.
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