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Long term shocks represent 76.5%% of output variance.
These two characteristics can be explained by the higher relative weight of long term shocks on the variation of output.
This affects the relative weight of short or long term shocks with respect to fluctuations in output.
This result is interesting, as the model does not impose restrictions that condition the relative importance of short or long term shocks as the specifications of Beveridge and Nelson (1981) or Clark (1987) do.
For example, in the first group, one assumes a negative correlation between the long and short term component, with the result that most of the variance in the output is explained by long term shocks.
In order to assess the importance of short or long term shocks we weighted the variance of the cyclical component ((sigma_{epsilon}^{2})) given the probabilities, from which we obtain that it represents 93%% of the variance in output.
Similar(51)
Finally, the relative weight of short and long terms shocks was estimated.
Although in this case, they are related to long-term shocks.
In the other models, long-term shocks predominate, although the variance of the cyclical component is between 10 and 24%%.
In assessing the relative weight of variances, we find that the long-term shocks explain 83% of output's variability, and short-term shocks the remaining 17%%.
This would indicate that, if this model were correct, the previously described persistence in the cycle itself would correspond to long-term shocks that occur during "atypical" periods.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com