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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, President and Fellows of Harvard College, 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. 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.
    4. 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.
    5. 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.
    6. Hamilton, James D., 1990. "Analysis of time series subject to changes in regime," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 39-70.
    7. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
    8. Geoffrey H. Moore, 1983. "Business Cycles, Inflation, and Forecasting, 2nd edition," NBER Books, National Bureau of Economic Research, Inc, number moor83-1, July.
    9. 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.
    10. repec:bla:ecorec:v:67:y:1991:i:197:p:115-25 is not listed on IDEAS
    11. Rappoport, Peter & Reichlin, Lucrezia, 1989. "Segmented Trends and Non-stationary Time Series," Economic Journal, Royal Economic Society, vol. 99(395), pages 168-177, Supplemen.
    12. Geoffrey H. Moore, 1983. "Appendices to "Business Cycles, Inflation, and Forecasting, 2nd edition"," NBER Chapters, in: Business Cycles, Inflation, and Forecasting, 2nd edition, pages 453-473, National Bureau of Economic Research, Inc.
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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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