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Bayesian Analysis of an Unobserved-Component Time Series Model of GDP with Markov-Switching and Time-Varying Growths

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  • Luginbuhl, Rob
  • de Vos, Aart

Abstract

We propose an unobserved-component time series model of gross domestic product that includes Markov switching as an unobserved component. In addition to a trend component, the model has two time-varying drift components. One drift represents the expected rate of growth during recession; the other drift represents the expected rate during expansion. Estimates indicate a substantial decline in the latter annual rate for the United States from 6.4% in 1950 to 3.6% by 1990. We have employed weak priors based on prewar data. The estimation makes use of the Gibbs sampler and the Metropolis algorithm.

Suggested Citation

  • Luginbuhl, Rob & de Vos, Aart, 1999. "Bayesian Analysis of an Unobserved-Component Time Series Model of GDP with Markov-Switching and Time-Varying Growths," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(4), pages 456-465, October.
    • Handle: RePEc:bes:jnlbes:v:17:y:1999:i:4:p:456-65
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    Citations

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    Cited by:

    1. Chin Nam Low & Heather Anderson & Ralph Snyder, 2006. "Beveridge-Nelson Decomposition with Markov Switching," Melbourne Institute Working Paper Series wp2006n14, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    2. Paap, Richard & van Dijk, Herman K, 2003. "Bayes Estimates of Markov Trends in Possibly Cointegrated Series: An Application to U.S. Consumption and Income," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(4), pages 547-563, October.
    3. Eliana González & Luis F. Melo & Luis E. Rojas & Brayan Rojas, 2011. "Estimations of the Natural Rate of Interest in Colombia," Money Affairs, CEMLA, vol. 0(1), pages 33-75, January-J.
    4. Beatriz C. Galvao, Ana, 2002. "Can non-linear time series models generate US business cycle asymmetric shape?," Economics Letters, Elsevier, vol. 77(2), pages 187-194, October.
    5. Siem Jan Koopman & Philip Hans Franses, 2002. "Constructing Seasonally Adjusted Data with Time‐varying Confidence Intervals," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(5), pages 509-526, December.
    6. Graflund, Andreas, 2001. "Are the Nordic Stock Markets Mean Reverting?," Working Papers 2001:15, Lund University, Department of Economics.
    7. Shami, R.G. & Forbes, C.S., 2000. "A structural Time Series Model with Markov Switching," Monash Econometrics and Business Statistics Working Papers 10/00, Monash University, Department of Econometrics and Business Statistics.
    8. Sinclair Tara M, 2009. "Asymmetry in the Business Cycle: Friedman's Plucking Model with Correlated Innovations," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 14(1), pages 1-31, December.
    9. Sandberg, Rickard, 2016. "Trends, unit roots, structural changes, and time-varying asymmetries in U.S. macroeconomic data: the Stock and Watson data re-examined," Economic Modelling, Elsevier, vol. 52(PB), pages 699-713.
    10. Andreas Graflund, 2000. "A Bayes Inference Approach to Testing Mean Reversion in the Swedish Stock Market," Econometric Society World Congress 2000 Contributed Papers 1363, Econometric Society.
    11. Siem Jan Koopman & Kai Ming Lee, 2005. "Measuring Asymmetric Stochastic Cycle Components in U.S. Macroeconomic Time Series," Tinbergen Institute Discussion Papers 05-081/4, Tinbergen Institute.

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