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  • Mardi Dungey (a1), Jan P.A.M. Jacobs (a2), Jing Tian (a3) and Simon van Norden (a4)


A well-documented property of the Beveridge–Nelson trend–cycle decomposition is the perfect negative correlation between trend and cycle innovations. We show how this may be consistent with a structural model where permanent innovations enter the cycle or transitory innovations enter the trend, and that identification restrictions are necessary to make this structural distinction. A reduced-form unrestricted version is compatible with either option, but cannot distinguish which is relevant. We discuss economic interpretations and implications using U.S. real GDP data.


Corresponding author

Address correpondence to: Simon van Norden, HEC Montréal, 3000 Chemin de la Cote Sainte Catherine, Montreal, QC H3T 2A7, Canada; e-mail:


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  • Mardi Dungey (a1), Jan P.A.M. Jacobs (a2), Jing Tian (a3) and Simon van Norden (a4)


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