On the temporary and permanent components of global construction

ABSTRACT

This letter applies unobserved components models to decompose global construction series. By examining the temporary and permanent trends in a structural time-series framework, the uninterpretable difficulties inherent in bandpass filters are overcome and the trend–cycle decomposition of the construction series is treated as a special case. Overall global construction mimic patterns in the global economy: falling with recessions and rising with upturns. Understanding the cyclical behaviour of global construction output and its long run trend holds important lessons for smoothing the construction cycle.

KEYWORDS:

• Construction output
• unobserved components
• cycles
• trends

JEL CLASSIFICATION:

• C22
• L74