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Capturing the Shape of Business Cycles with Nonlinear Autoregressive Leading Indicator Models


Author Info

  • Athanasopoulos, G.
  • Anderson, H.M.


  • Vahid, F.



This paper studies linear and linear autoregressive leading indicator models of business cycles in OECD countries. The models use the spread between short-term and long-term interest rates as leading indicators for GDP, and their success in capturing business cycles gauged by the non-parametric procedures developed by Harding and Pagan (2001). Our preliminary findings indicate that bivariate nonlinear models of output and the interest rate spread can successfully capture the shape of the business cycle. In particular, they can capture the features of recession and the deviation of the actual path of the cycles from a triangular approximation to this path, both characteristics that other models of GDP fail to reproduce.

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Bibliographic Info

Paper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 7/01.

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Length: 36 pages
Date of creation: Jun 2001
Date of revision:
Handle: RePEc:msh:ebswps:2001-7

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Keywords: Business Cycles; Leading Indicators; Nonlinear Models; Yield Spread;

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Cited by:
  1. Harding, Don & Pagan, Adrian, 2001. "Extracting, Using and Analysing Cyclical Information," MPRA Paper 15, University Library of Munich, Germany.
  2. Elalaoui, Aicha, 2014. "Identifying and characterizing the business cycle: the case of Morocco," MPRA Paper 56811, University Library of Munich, Germany, revised May 2014.


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