Trend-Cycle Interactions and the Subprime Crisis: Analysis of US and Canadian Output

In the following paper a simultaneous unobserved components model is applied to USAmerican and Canadian output data in order examine causal structure of trend cycle shocks way it changes over time. The main focus placed on analysis subprime crisis impact components. structural identified by means heteroscedasticity. During for both countries we determine strong increase variance compared previous period. This underlines permanent effect and, thus, problems as potential cause. Moreover, are more volatile Canada than USA. A further similarity between complete disappearance shock volatility.