We demonstrate how Bayesian shrinkage can address problems with utilizing large information sets to calculate trend and cycle via a multivariate Beveridge-Nelson (BN) decomposition. We illustrate our approach by estimating the U.S. output gap with large Bayesian vector autoregressions that...

We consider how to estimate the trend and cycle of a time series, such as real GDP, given a large information set. Our approach makes use of the Beveridge-Nelson decomposition based on a vector autoregression, but with two practical considerations. First, we show how to determine which...

Interest rates have fallen worldwide in recent decades, a phenomenon that has been linked at least in part to a decline in the natural rate of interest, r* (a.k.a. “r-star”). To investigate this decline, we consider a multivariate trend-cycle decomposition of real interest rates using a...