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Further on the Nature of the Australian Business Cycle

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  • ALLAN P. LAYTON

Abstract

Strong and Tan (1991) found Australian output variation was well characterized by a stochastic trend implying output shocks have a permanent effect on the level of activity. The paper finds that in Australia the stochastic trend alternative is statistically dominated when the data are allowed to be characterized by a probabilistic segmented trend specification. This finding implies shocks will only have a permanent effect on output when the series' growth path switches from one growth regime into another as a result of the shock.

Suggested Citation

  • Allan P. Layton, 1994. "Further on the Nature of the Australian Business Cycle," The Economic Record, The Economic Society of Australia, vol. 70(208), pages 12-18, March.
  • Handle: RePEc:bla:ecorec:v:70:y:1994:i:208:p:12-18
    DOI: 10.1111/j.1475-4932.1994.tb01820.x
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    References listed on IDEAS

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    1. John Y. Campbell & N. Gregory Mankiw, 1987. "Are Output Fluctuations Transitory?," The Quarterly Journal of Economics, Oxford University Press, vol. 102(4), pages 857-880.
    2. Diebold, Francis X & Rudebusch, Glenn D, 1989. "Scoring the Leading Indicators," The Journal of Business, University of Chicago Press, vol. 62(3), pages 369-391, July.
    3. Geoffrey H. Moore, 1983. "Business Cycles, Inflation, and Forecasting, 2nd edition," NBER Books, National Bureau of Economic Research, Inc, number moor83-1, June.
    4. Sam Strong & Siew Ping Tan, 1991. "The Australian Business Cycle: Its Definition and Existence," The Economic Record, The Economic Society of Australia, vol. 67(2), pages 115-125, June.
    5. Geoffrey H. Moore, 1983. "Introductory pages to "Business Cycles, Inflation, and Forecasting, 2nd edition"," NBER Chapters, in: Business Cycles, Inflation, and Forecasting, 2nd edition, pages -25, National Bureau of Economic Research, Inc.
    6. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    7. Nelson, Charles R & Kang, Heejoon, 1984. "Pitfalls in the Use of Time as an Explanatory Variable in Regression," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(1), pages 73-82, January.
    8. Strong, Sam & Tan, Siew Ping, 1991. "The Australian Business Cycle: Its Definition and Existence," The Economic Record, The Economic Society of Australia, vol. 67(197), pages 115-125, June.
    9. Rappoport, Peter & Reichlin, Lucrezia, 1989. "Segmented Trends and Non-stationary Time Series," Economic Journal, Royal Economic Society, vol. 99(395), pages 168-177, Supplemen.
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    Cited by:

    1. Narayan, Paresh Kumar, 2008. "An investigation of the behaviour of Australia's business cycle," Economic Modelling, Elsevier, vol. 25(4), pages 676-683, July.

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