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Stylized Facts of the Business Cycle Revisited: A Structural Modelling Approach

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  • Boone, Laurence
  • Hall, Stephen G

Abstract

Stylized facts of the business cycle in the G7 countries are derived using a stochastic trend model, which allows for structural breaks in the underlying series in various ways. The results are compared to those of Backus and Kehoe's paper (1992) which used the Hoderick-Prescott filter. Numerous studies have shown that this filter distorts the dynamic properties of the data, yielding misleading stylized facts. Boone and Hall (1999) developed a method to decompose time series based on the stochastic trend model that was demonstrated to be more reliable and robust in the presence of structural breaks using Monte Carlo techniques. This paper applies this technique to give new evidence on the smoothness of consumption, the counter-cyclicality of prices and variability of investment and technological shocks in the post-war period. Copyright @ 1999 by John Wiley & Sons, Ltd. All rights reserved.

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  • Boone, Laurence & Hall, Stephen G, 1999. "Stylized Facts of the Business Cycle Revisited: A Structural Modelling Approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 4(3), pages 253-268, July.
    • Handle: RePEc:ijf:ijfiec:v:4:y:1999:i:3:p:253-68
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    Cited by:

    1. Lamey, L. & Deleersnyder, B. & Dekimpe, M.G. & Steenkamp, J-B.E.M., 2005. "The Impact of Business-Cycle Fluctuations on Private-Label Share," ERIM Report Series Research in Management ERS-2005-061-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    2. Karunanayake, Indika & Valadkhani, Abbas & O’Brien, Martin, 2012. "GDP Growth and the Interdependency of Volatility Spillovers," MPRA Paper 50398, University Library of Munich, Germany.
    3. Zheng, Jinghai & Bigsten, Arne & Hu, Angang, 2009. "Can China's Growth be Sustained? A Productivity Perspective," World Development, Elsevier, vol. 37(4), pages 874-888, April.

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