Econometrica: Jan 1972, Volume 40, Issue 1

More Stochastic Properties of the Klein-Goldberger Model

https://doi.org/0012-9682(197201)40:1<87:MSPOTK>2.0.CO;2-M
p. 87-98

R. J. Bowden

The central idea of the business cycle is of a pervasive cyclical movement of economic indicators. This paper shows that the concept of such simultaneous movements can be given a precise meaning by performing a principal component analysis of spectral density matrices or, with a different shade of meaning, coherence matrices. It suggests also a new method of computing spectral approximations for models that are nonlinear in their variables. The methods are applied to the Klein-Goldberger model for the United States.

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