An extension to Sun's decomposition methodology: The Path Based approach

This paper proposes the use of the Path Based approach as a general and flexible method to carry out exact decompositions when some additional information for intermediate periods is available. This additional information is used in a Maximum Entropy estimation procedure to arrive at parameter estimates that determine the temporal paths followed by the decomposition factors. An empirical illustration, decomposing changes in greenhouse gas emissions in the EU 15 from 1990 to 2002 by both the Path Based and Sun's periodwise method, is carried out. The outcome shows that the Path Based approach leads to more accurate results than Sun's periodwise method when both are compared with a complete time series decomposition.