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Analysis of the US business cycle with a Vector‐Markov‐switching model
Author(s) -
Kontolemis Ze G.
Publication year - 2001
Publication title -
journal of forecasting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.543
H-Index - 59
eISSN - 1099-131X
pISSN - 0277-6693
DOI - 10.1002/1099-131x(200101)20:1<47::aid-for783>3.0.co;2-f
Subject(s) - univariate , markov chain , business cycle , series (stratigraphy) , econometrics , computer science , multivariate statistics , markov model , statistics , mathematics , economics , paleontology , keynesian economics , biology
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.