Analysis of the US business cycle with a Vector-Markov-switching model

Abstract

This paper identifies turning points for the US ‘business cycle’ using information from different time series. The model, a multivariate Markov‐switching model, assumes that each series is characterized by a mixture of two normal distributions (a high and low mean) with the switching from one to the other determined by a common Markov process. The procedure is applied to the series composing the composite coincident indicator in the USA to obtain business cycle turning points. The business cycle chronology is closer to the NBER reference cycle than the turning points obtained from the individual series using a univariate model. The model is also used to forecast the series with some encouraging results. Copyright © 2001 John Wiley & Sons, Ltd.

An Alternative Business Cycle Dating Procedure for South Africa

“…Much work has followed from this study, including that done by Phillips (), Goodwin (), Kim and Yoo (), Artis et al . (), Kim and Nelson (), Kontolemis (), Artis et al . (), and Altug and Bildirici ()…”

An Alternative Business Cycle Dating Procedure for South Africa

“…Much work has followed from this study, including that done by Phillips (), Goodwin (), Kim and Yoo (), Artis et al . (), Kim and Nelson (), Kontolemis (), Artis et al . (), and Altug and Bildirici ()…”

Some statistical aspects of methods for detection of turning points in business cycles

“……”

Markov Switching Models for GDP Growth in a Small Open Economy

“…General references to HMM modelling include Levinson, Rabiner and Sondhi (1983), Rabiner (1989), Elliot, Aggoun and Moore (1995) and MacDonald and Zucchini (1997). Following the lead of Goldfeld and Quandt (1973), and Hamilton (1989), these and related methods have been used widely in economic contexts (see Engle and Hamilton, 1990;Hamilton and Susmel, 1994;Kim, 1994;Kim andNelson, 1999a, 1999b;McConnell and Perez-Quiros, 2000;Kontolemis, 2001; for example). In particular Krolzig (1997) provides a comprehensive and thorough account of the theory and inference for Markov switching vector autoregressions with application to business cycle analysis.…”

An Alternative Business Cycle Dating Procedure for South Africa

“…Much work has followed from this study, including that done by Phillips (), Goodwin (), Kim and Yoo (), Artis et al . (), Kim and Nelson (), Kontolemis (), Artis et al . (), and Altug and Bildirici ()…”

Some statistical aspects of methods for detection of turning points in business cycles

“……”

Markov Switching Models for GDP Growth in a Small Open Economy

“…General references to HMM modelling include Levinson, Rabiner and Sondhi (1983), Rabiner (1989), Elliot, Aggoun and Moore (1995) and MacDonald and Zucchini (1997). Following the lead of Goldfeld and Quandt (1973), and Hamilton (1989), these and related methods have been used widely in economic contexts (see Engle and Hamilton, 1990;Hamilton and Susmel, 1994;Kim, 1994;Kim andNelson, 1999a, 1999b;McConnell and Perez-Quiros, 2000;Kontolemis, 2001; for example). In particular Krolzig (1997) provides a comprehensive and thorough account of the theory and inference for Markov switching vector autoregressions with application to business cycle analysis.…”

An Alternative Business Cycle Dating Procedure for South Africa

“…Much work has followed from this study, including that done by Phillips (), Goodwin (), Kim and Yoo (), Artis et al . (), Kim and Nelson (), Kontolemis (), Artis et al . (), and Altug and Bildirici ()…”

Some statistical aspects of methods for detection of turning points in business cycles

“……”

Markov Switching Models for GDP Growth in a Small Open Economy

“…General references to HMM modelling include Levinson, Rabiner and Sondhi (1983), Rabiner (1989), Elliot, Aggoun and Moore (1995) and MacDonald and Zucchini (1997). Following the lead of Goldfeld and Quandt (1973), and Hamilton (1989), these and related methods have been used widely in economic contexts (see Engle and Hamilton, 1990;Hamilton and Susmel, 1994;Kim, 1994;Kim andNelson, 1999a, 1999b;McConnell and Perez-Quiros, 2000;Kontolemis, 2001; for example). In particular Krolzig (1997) provides a comprehensive and thorough account of the theory and inference for Markov switching vector autoregressions with application to business cycle analysis.…”