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Modeling the European cycle with factor structure and regime switching

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  • Jose Cancelo

Abstract

This paper compares the stylized facts of the European growth cycle stemming from the Gross Domestic Product (GDP) of the European Monetary Union with an unobserved common factor derived from a dynamic factor model with regime switching. The aim of this paper is to provide empirical evidence about the most adequate indicator for short-term monitoring of the cyclical state of the European economy. Copyright International Atlantic Economic Society 2004

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  • Jose Cancelo, 2004. "Modeling the European cycle with factor structure and regime switching," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 10(2), pages 87-99, May.
    • Handle: RePEc:kap:iaecre:v:10:y:2004:i:2:p:87-99:10.1007/bf02295672
    DOI: 10.1007/BF02295672
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    3. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    4. Chauvet, Marcelle, 1998. "An Econometric Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 969-996, November.
    5. Kim, Chang-Jin, 1994. "Dynamic linear models with Markov-switching," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 1-22.
    6. Chang-Jin Kim & Charles R. Nelson, 1999. "Has The U.S. Economy Become More Stable? A Bayesian Approach Based On A Markov-Switching Model Of The Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 608-616, November.
    7. James H. Stock & Mark W. Watson, 1989. "New Indexes of Coincident and Leading Economic Indicators," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 351-409, National Bureau of Economic Research, Inc.
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