The paper investigates the importance of modeling in cay estimations from a statistical and economic perspective by observing the stochastic trend, a thus far neglected component. In order to do this, we perform an empirical analysis on US secular annual data from 1900 to 2015 considering the cay with non-durables and services and the cay with total consumption expenditure. Findings show the usefulness of including the stochastic trend in cay estimation. Furthermore, out-of-sample statistical and economic significance tests show the ability of the cay model with trend to outperform the traditional cay measure.

Do we need a stochastic trend in cay estimation? Yes.

COSTOLA, MICHELE;Frattarolo, Lorenzo;LUCCHETTA, Marcella;PARADISO, Antonio
2016-01-01

Abstract

The paper investigates the importance of modeling in cay estimations from a statistical and economic perspective by observing the stochastic trend, a thus far neglected component. In order to do this, we perform an empirical analysis on US secular annual data from 1900 to 2015 considering the cay with non-durables and services and the cay with total consumption expenditure. Findings show the usefulness of including the stochastic trend in cay estimation. Furthermore, out-of-sample statistical and economic significance tests show the ability of the cay model with trend to outperform the traditional cay measure.
WORKING PAPER-DEPARTMENT OF ECONOMICS, CÀ FOSCARI. UNIVERSITY OF VENICE
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10278/3680914
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