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Real vs. Nominal Cycles: A Multistate Markov-Switching Bi-Factor Approach

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  • Leiva-Leon, Danilo

Abstract

This paper proposes a probabilistic model based on comovements and nonlinearities useful to assess the type of shock affecting each phase of the business cycle. By providing simultaneous inferences on the phases of real activity and inflation cycles, contractionary episodes are dated and categorized into demand, supply and mix recessions. The impact of shocks originated in the housing market over the business cycle is also assessed, finding that recessions are usually accompanied by housing deflationary pressures, while expansions are mainly influenced by housing demand shocks, with the only exception occurred during the period surrounding the "Great Recession," affected by expansionary housing supply shocks.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 54456.

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Date of creation: 14 Dec 2013
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Handle: RePEc:pra:mprapa:54456

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Keywords: Business Cycles; Inflation Cycles; Housing Price Cycles; Dynamics Factors; Markov-Switching.;

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References

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Cited by:
  1. Barnett, William A. & Chauvet, Marcelle & Leiva-Leon, Danilo, 2014. "Real-Time Nowcasting Nominal GDP Under Structural Break," MPRA Paper 53699, University Library of Munich, Germany.
  2. Danilo Leiva-Leon, 2014. "A New Approach to Infer Changes in the Synchronization of Business Cycle Phases," Working Papers 14-38, Bank of Canada.

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