Was comparison of two business cycle dating methods consider, that

This paper evaluates the ability of formal rules to establish U. We consider two approaches, a nonparametric algorithm and a parametric Markov-switching dynamic-factor model. In order to accurately assess the real-time performance of these rules, we construct a new unrevised "real-time" data set of employment, industrial production, manufacturing and trade sales, and personal income. We then apply the rules to this data set to simulate the accuracy and timeliness with which they would have identified the NBER business cycle chronology had they been used in real time for the past 30 years. Both approaches accurately identified the NBER dated turning points in the sample in real time, with no instances of false positives.

A comparison of the real-time performance of business cycle dating methods

Kim, Chang-Jin, Kim, C-J. Layton, Allan P. James H.

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Watson, Stock, J. Kennedy School of Government. Hamilton, James D, Chauvet, Marcelle, Full references including those not matched with items on IDEAS More about this item Statistics Access and download statistics Corrections All material on this site has been provided by the respective publishers and authors.

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We set out to compare two methods of dating the business cycle, a non-parametric method associated with the NBER and a parametric one based on estimating an MS model. By using an MS model applied to real US GNP growth we showed, by means of some approximations, that both the NBER and MS methods utilize information in the growth rates of real Cited by: "A comparison of two business cycle dating methods," Journal of Economic Dynamics and Control, Elsevier, vol. 27(9), pages , July. Gerhard Bry & Charlotte Boschan, " Cyclical Analysis of Time Series: Selected Procedures and Computer Programs," NBER Books, National Bureau of Economic Research, Inc, number bry_, January. A Comparison of the Real-Time Performance of Business Cycle Dating Methods. In addition to suggesting that business cycle dating rules are an informative tool to use alongside the traditional NBER analysis, these results provide formal evidence regarding the speed with which macroeconomic data reveals information about new business cycle.

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Comparison of two business cycle dating methods

Economic literature: papersarticlessoftwarechaptersbooks. The difference between the Harding-Pagan approach and the Markov-switching approach is that the latter formulates a specific statistical model of the object of interest and derives the optimal inference about it, whereas the former leaves vague and intuitive exactly what this algorithm is intended to measure.

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Once one acknowledges that business cycles are a feature that a given data set may or may not exhibit, it seems natural that the criteria for dating them would depend on the particular properties of the data. We should want to use a different rule for a country with a very high average growth rate compared to a country with a low average growth rate, or for a country with much poorer quality of national income data compared to one with superior data.

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The rule works well on postwar U. Despite these differences with the authors, I find myself agreeing with their fundamental conclusion.

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I, too, feel that the algorithm for dating business cycles proposed in my paper is not the best one to use, though my reasons are rather different from those of Harding and Pagan. My main concern is that superior methods have been developed since Specifically, the paper just used univariate GNP data. A key concern for students of the business cycle has always been with comovements of different variables- a recession is something that shows up in a number of different series at the same time.

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Thinking of a recession as an unobserved process that affects a vector of Markov-switching economic time series has produced a number of useful insights about business cycles; see for example ChauvetKim and NelsonChauvet, Juhn, and Potterand Kim and Murrayand the references therein. By contrast, the Harding and Pagan approach does not generalize at all naturally to consideration of vectors.

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I think it is a mistake to let any model become a complicated black box, whose method of inference is too arcane or mysterious to be questioned. On this score, their process of stripping down the Markov-switching framework and then finding a linear approximation to its inference is very helpful in understanding what the procedure does, and a welcome contribution to the literature.

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References Bry, G. Chauvet, Marcelle. An econometric characterization of business cycle dynamics with factor structure and regime switches.

A Comparison of the Real-Time Performance of Business Cycle Dating Methods Marcelle C HAUVET Department of Economics, University of California, Riverside, CA ([email protected]) Jeremy P IGER Department of Economics, University of Oregon, Eugene, OR ([email protected]). CiteSeerX - Document Details (Isaac Councill, Lee Giles, Pradeep Teregowda): ere negative. Harding and Pagan find the latter rule more appealing on grounds of transparency, robustness, simplicity, and replicability. Although the two approaches to dating business cycles may appear very comparable when expressed in these terms, there is an important philosophical . "A comparison of two business cycle dating methods," Journal of Economic Dynamics and Control, Elsevier, vol. 27(9), pages , July. Hamilton, James D, "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages , March. Chauvet, Marcelle.

International Economic Review 39, Markov-switching in disaggregate unemployment rates. Empirical Economics, forthcoming. Hamilton, James D.

We compare two popular business cycle dating methods, both of which are multivariate in that they use information from many time series to establish business cycle dates. The first is a nonparametric algorithm, developed and discussed in Harding and Pagan and denoted MHP, for multivariate Harding-Pagan, hereafter.

A new approach to the economic analysis of nonstationary time series and the business cycle. Econometrica 57, State space models, in: Engle, Robert F. Permanent and transitory components of recessions.

A comparison of two business cycle dating methods Harding, Don & Pagan, Adrian A comparison of two business cycle dating methods. Journal of Economic Dynamics and Control, 27 (9), pp. Cited by: Comment on" A comparison of two business cycle dating methods". . A Comparison of the Real-Time Performance of Business Cycle Dating Methods. Journal of Business & Economic Statistics: Vol. 26, No. 1, pp. Cited by:

Related Papers. Dating business cycle turning points.

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