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Decomposition of the European GDP based on Singular Spectrum Analysis

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  • Leon, Costas

Abstract

In this paper, the Singular Spectrum Analysis (SSA), a relatively new tool originated in natural sciences, for orthogonal decomposition of time series, is presented and applied in the European real, seasonally unadjusted quarterly GDP for the period 1995 - 2010. SSA is suitable for short and noisy time series, properties that characterize many macroeconomic time series. In this paper, I decompose the GDP in trend, cycle, seasonals and noise components. There are significant similarities but also some differences between the SSA-based filter and the other well-known macroeconomic filters. These differences are shown here by means of correlation matrices and spectral measures. Although SSA is a method that only very recently has been introduced in macroeconomics, its use in the natural sciences for more than three decades, makes it a serious candidate for tackling macroeconomic issues such as filtering, denoising and smoothing.

Suggested Citation

  • Leon, Costas, 2015. "Decomposition of the European GDP based on Singular Spectrum Analysis," MPRA Paper 65812, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:65812
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    More about this item

    Keywords

    Macroeconomics; economic fluctuations; business cycle; dynamical systems; spectral methods; singular spectrum analysis.;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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