Premium
Fixed versus time‐varying transfer functions for modelling business cycles
Author(s) -
Edlund PerOlov,
T. Søgaards Henning
Publication year - 1993
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/for.3980120313
Subject(s) - business cycle , constant (computer programming) , transfer function , computer science , function (biology) , econometrics , transfer (computing) , mathematics , economics , macroeconomics , evolutionary biology , biology , parallel computing , electrical engineering , programming language , engineering
Transfer function models can be used to model the relationship between leading indicators and the business cycle. The traditional transfer function approach assumes that the pure delay (lead) as well as the other parameters of the model are constant. Results from studies on Swedish business cycle data indicate that the relationship between the leading indicators and the business cycle may be time varying. In this paper the traditional approach is compared to a recursive estimation procedure that allows the model to change over time. The results show that the recursive procedure is useful and that the estimates of the model parameters indeed vary over time.