On the correspondence between data revision and trend-cycle decomposition

Abstract

This article 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.

Keywords:

• data revisions
• state–space models
• Kalman filter
• Kalman smoother
• trend-cycle decomposition

JEL Classification:

• C22
• C53
• C82