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Application of three non-linear econometric approaches to identify business cycles in Peru

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  • Gabriel Rodríguez

    ()
    (Departamento de Economía - Pontificia Universidad Católica del Perú)

Abstract

I use three non-linear econometric models to identify and analyze business cycles in the Peruvian economy for the period 1980:1-2008:4. The models are the Smooth Transition Autoregressive (STAR) model suggested by Teräsvirta (1994), the extended version of the Markov-Switching model proposed by Hamilton (1989), and the plucking model of Friedman (1964, 1993). The results indicate strong rejection of the null hypothesis of linearity. The majority of models identify quarters concentrated around 1988-1989 and 1990-1991 as recession times. Other important events which happened in the Peruvian economy (natural disaster in 1983, e¤ects of the Asian and Russian crises in 1990s, terrorist activities in 1980s) are not selected except as atypical observations. Most of models also identify the period 1995:1-2008:4 as a very long and stable period of moderate-high growth rates. From the perspective of the Peruvian economic history and from a statistical point of view, the MSIAH(3) model is the preferred model.

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Bibliographic Info

Paper provided by Departamento de Economía - Pontificia Universidad Católica del Perú in its series Documentos de Trabajo with number 2010-284.

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Length: 45 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:pcp:pucwps:wp00284

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Postal: Av. Universitaria 1801, San Miguel, Lima, Perú
Phone: (511) 626-2000 ext. 4950, 4951
Fax: (511) 626-2874
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Web page: http://www.pucp.edu.pe/departamento/economia/
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Keywords: Nonlinearities; Asymmetries; STARModel; Markov-Switching Model; Plucking Model; Recession Times;

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  1. Terasvirta, T & Anderson, H M, 1992. "Characterizing Nonlinearities in Business Cycles Using Smooth Transition Autoregressive Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages S119-36, Suppl. De.
  2. Nadal De Simone, Francisco & Clarke, Sean, 2007. "Asymmetry in business fluctuations: International evidence on Friedman's plucking model," Journal of International Money and Finance, Elsevier, vol. 26(1), pages 64-85, February.
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Cited by:
  1. Mendoza, Liu & Morales, Daniel, 2012. "Constructing a real-time coincident recession index: an application to the Peruvian economy," Working Papers 2012-020, Banco Central de Reserva del Perú.
  2. Bazán, Walter, 2011. "No-linealidades y asimetrías en el crédito peruano," Working Papers 2011-015, Banco Central de Reserva del Perú.
  3. Mendoza, Liu & Morales, Daniel, 2013. "Construyendo un índice coincidente de recesión: Una aplicación para la economía peruana," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 26, pages 81-100.

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