stochastic trend (first difference - changing mean)

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dtideman
Posts: 8
Joined: Tue May 12, 2015 9:34 am

stochastic trend (first difference - changing mean)

Postby dtideman » Thu Jun 04, 2015 3:45 am

I am trying to imitate Blanchard and Perotti (2002) and calculate the stochastic trend of gdp, government expenditure and government revenue. However, I am not sure how to do the following in Eviews 8:
"We take first-differences of each variable, and, to account for changes in the
underlying drift terms, we subtract a changing mean, constructed as the
geometric average of past first differences, with decay parameter equal to
2.5 percent per quarter"

If anyone could help that would be great!

Thank you in advance.

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