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Measuring business cycles: A temporal disaggregation model with regime switching

Listed author(s):
  • Huang, Yu-Lieh

In this paper, we propose a temporal disaggregation model with regime switches to disaggregate U.S. quarterly GDP into monthly figures. Alternative to the existing literature, our model is able to capture the nonlinear behaviors of both aggregated and disaggregated output series as well as the asymmetric nature of business cycle phases. To demonstrate the applicability of the proposed model, we apply the model with a Markov trend component to U.S. quarterly real GDP. The results suggest that the combination of a temporal disaggregation model with Markov switches leads to a successful representation of the data relative to the existing literature. Also, the inferred probabilities of unobserved states are clearly in close agreement with the NBER reference cycle on a monthly basis, which highlights the importance of nonlinearities in business cycle.

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File URL: http://www.sciencedirect.com/science/article/pii/S0264999311002446
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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 29 (2012)
Issue (Month): 2 ()
Pages: 283-290

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Handle: RePEc:eee:ecmode:v:29:y:2012:i:2:p:283-290
DOI: 10.1016/j.econmod.2011.10.008
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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