Using Output growth QoQ or YoY

Estimation ML/Bayesian estimation
1

Hi everyone

I have a question related to data
Normally, I see that data like GDP, when putting into model, we often compute the quarterly growth rate of GDP (Quarter-over-Quarter), then this growth rate fluctuates a lot around the mean. On the other hand, when I compute the quarterly output growth rate of GDP but Year-over-Year, for example, GDP at the first quarter 2008 will be compared to the first quarter 2007. This Year-over-Year growth rate of quarterly GDP does not fluctuate a lot.
But Can I use such kind of Year-over-Year growth rate of quarterly data on GDP, Inflation, consumption, investment to estimate DSGE model

1 Like
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Yes, you can do that, but you would not gain anything. Year on year growth rates are the same as the sum of four quarterly growth rates. So the two are equivalent in terms of information (except for initial conditions which do not matter asymptotically)