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Growth and volatility regime switching models for New Zealand GDP data

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Author Info
Robert A Buckle
David Haugh
Peter Thomson () (The Treasury (Buckle, Haugh), Statistics Research Associates Ltd (Thomson))

Additional information is available for the following registered author(s):

Abstract

This paper fits hidden Markov switching models to New Zealand GDP data. A primary objective is to better understand the utility of these methods for modelling growth and volatility regimes present in the New Zealand data and their interaction. Properties of the models are developed together with a description of the estimation methods, including use of the Expectation Maximisation (EM) algorithm. The models are fitted to New Zealand GDP and production sector growth rates to analyse changes in their mean and volatility over time. The paper discusses applications of the methodology to identifying changes in growth performances, and examines the timing of growth and volatility regime switching between production sectors. Conclusions to emerge are that, in contrast to the 1980s, New Zealand GDP growth experienced an unusually long period of time in high growth and low volatility regimes during the 1990s. The paper evaluates sector contributions to this 1990s experience and discusses directions for further development.

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File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2002/02-08/twp02-08.pdf
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Publisher Info
Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 02/08.

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Length: 56 pages
Date of creation: Jun 2002
Date of revision:
Handle: RePEc:nzt:nztwps:02/08

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Postal: New Zealand Treasury, PO Box 3724, Wellington, New Zealand
Phone: +64-4-472 2733
Fax: +64-4-473 0982
Web page: http://www.treasury.govt.nz
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Related research
Keywords: Hidden Markov models; regime switching; growth; business cycles; volatility; production sectors; GDP.;

Other versions of this item:

Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
E23 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Production
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Viv B Hall & C. John McDermott, 2005. "Regional business cycles in New Zealand:Do they exist? What might drive them?," Urban/Regional 0509013, EconWPA. [Downloadable!]
    Other versions:
  2. Alejandro R. Pena Sanchez, 2004. "El ciclo económico en Uruguay - Un modelo de Switching Regimes," Econometric Society 2004 Latin American Meetings 111, Econometric Society. [Downloadable!]
  3. Ramirez-Rondán Nelson, 2007. "Nonlinear Volatility Effects on Growth in Developing Economies," Working Papers 2007-016, Banco Central de Reserva del Perú. [Downloadable!]
  4. Iris Claus & Grant Scobie, 2002. "Saving in New Zealand: Measurement and Trends," Treasury Working Paper Series 02/02, New Zealand Treasury. [Downloadable!]
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