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The beveridge-nelson decomposition: Properties and extensions

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Summary

This paper discusses the time series properties of the Beveridge-Nelson decomposition and provides extensions in two fundamental directions: in the first place it is shown that anyARIMA(p, 2, q) process can be additively decomposed into anIMA (2, 1) trend and a stationary component; secondly, for the class of seasonally integrated processes, i.e. displaying unit roots at the seasonal frequencies, another component, namely the seasonal component, is identified by the condition that its predictions will average, out to zero over any one-year time span. Furthermore, algorithms for the extraction of the components are given which exploit the Kalman filter recursions once the data generating process is cast in the state space form.

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  1. Università degli Studi di Perugia, Perugia, Italy

    Tommaso Proietti

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  1. Tommaso Proietti
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Correspondence to Tommaso Proietti.

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Proietti, T. The beveridge-nelson decomposition: Properties and extensions. J. It. Statist. Soc. 4, 101–124 (1995). https://doi.org/10.1007/BF02589061

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