Analysis of the U.S. Business Cycle with a Vector-Markov-Switching Model

August 1, 1999

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Zenon Kontolemis. Analysis of the U.S. Business Cycle with a Vector-Markov-Switching Model, (USA: International Monetary Fund, 1999) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper identifies turning points for the U.S. business cycle using different time series. The model, a multivariate Markov-Swiching model, assumes that each series is characterized by a mixture of two normal distributions (a high and low mean) with switching determined by a common Markov process. The procedure is applied to the series that make up the composite U.S. coincident indicator 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 encouraging results.

Subject: Business cycles, Cyclical indicators, Economic growth, External position, Industrial production, International investment position, National accounts, Personal income, Production

Keywords: Business Cycle, Business cycle chronology, Business cycles, Cyclical indicators, Industrial production, International investment position, NBER Business Cycle Chronology, NBER downturn, NBER methodology, NBER reference cycle, Personal income, Regime Switching, Turning points, VMS model, WP

Publication Details

Pages:

19
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/107
Stock No:

WPIEA1071999
ISBN:

9781451852967
ISSN:

1018-5941

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