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Beveridge-Nelson decomposition with Markov switching
journal contributionposted on 2017-06-08, 06:59 authored by Low, Chin Nam, Anderson, Heather, Snyder, Ralph D.
This paper considers Beveridge-Nelson decomposition in a context where the permanent and transitory components both follow a Markov switching process. Our approach incorporates Markov switching into a single source of error state-space framework, allowing business cycle asymmetries and regime switches in the long-run multiplier.