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Business cycle dynamics: A bottom-up approach with Markov-chain measurement

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  • Christian Müller
  • Eva Köberl

Abstract

Business cycle dynamics can be seen as footprints left by individual decision makers. Tracing those footprints we offer a novel, largely model independent and exogenous measure of the business cycle dynamics. This measure also, allows for distinguishing positive and negative shocks without prior estimation. Utilizing more than twentythousand observations of firms surveyed quarterly in the periods (1999-2006), we employ a Markov-chain approach combined with conventional time series econometrics for gauging the dynamics of business cycles. Since we start the analysis with firm level data we label our method the “bottom-up approach”.

Suggested Citation

  • Christian Müller & Eva Köberl, 2015. "Business cycle dynamics: A bottom-up approach with Markov-chain measurement," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2015(1), pages 41-61.
    • Handle: RePEc:oec:stdkab:5jrs0lv6xs7b
    DOI: 10.1787/jbcma-2015-5jrs0lv6xs7b
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    More about this item

    Keywords

    Business cycle dynamics; shock identification; Markov-chain; impulseresponse analysis.;
    All these keywords.

    JEL classification:

    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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