On the correspondence between data revision and trend-cycle decomposition

Abstract

This paper places the data revision model of Jacobs and van Norden (2011) within a class of trend-cycle decompositions relating directly to the Beveridge-Nelson decomposition. In both these approaches identifying restrictions on the covariance matrix under simple and realistic conditions may produce a smoothed estimate of the underlying series which is more volatile than the observed series.JEL classification: C22, C53, C82