IDEAS home Printed from https://ideas.repec.org/a/spr/cliomt/v11y2017i1d10.1007_s11698-015-0135-0.html
   My bibliography  Save this article

A contribution to the analysis of historical economic fluctuations (1870–2010): filtering, spurious cycles, and unobserved component modeling

Author

Listed:
  • José Luis Cendejas

    (Universidad Francisco de Vitoria, Pozuelo de Alarcón)

  • Félix-Fernando Muñoz

    () (Universidad Autónoma de Madrid)

  • Nadia Fernández-de-Pinedo

    (Universidad Autónoma de Madrid)

Abstract

Abstract Time series filtering methods such as the Hodrick–Prescott (HP) filter, with a consensual choice of the smoothing parameter, eliminate the possibility of identifying long swing cycles (e.g., Kondratieff type) or, alternatively, may distort periodicities that are in fact present in the data, giving rise, for example, to spurious Kuznets-type cycles. In this paper, we propose filtering Maddison’s time series for the period 1870–2010 for a selection of developed countries using a less restrictive filtering technique that does not impose but instead estimates the cutoff frequency. In particular, we use unobserved component models that optimally estimate the smoothing parameter. Using this methodology, we identify cycles of periods, primarily in the range of 4–7 years (Juglar-type cycles), and a number of patterns of cyclical convergence. We analyze the historical processes underlying this last empirical finding: Peacetime periods, monetary arrangements, trade and investment flows, and industrial boosts are confluent forces driving the economic dynamism. After 1950, we observe a common business cycle factor that groups all economies, which is consistent with the consolidation of the so-called second globalization.

Suggested Citation

  • José Luis Cendejas & Félix-Fernando Muñoz & Nadia Fernández-de-Pinedo, 2017. "A contribution to the analysis of historical economic fluctuations (1870–2010): filtering, spurious cycles, and unobserved component modeling," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 11(1), pages 93-125, January.
  • Handle: RePEc:spr:cliomt:v:11:y:2017:i:1:d:10.1007_s11698-015-0135-0
    DOI: 10.1007/s11698-015-0135-0
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11698-015-0135-0
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    2. Branko Milanovic, 2005. "Can We Discern the Effect of Globalization on Income Distribution? Evidence from Household Surveys," World Bank Economic Review, World Bank Group, vol. 19(1), pages 21-44.
    3. Nelson, Charles R & Kang, Heejoon, 1981. "Spurious Periodicity in Inappropriately Detrended Time Series," Econometrica, Econometric Society, vol. 49(3), pages 741-751, May.
    4. Eichengreen, Barry, 1996. "Golden Fetters: The Gold Standard and the Great Depression, 1919-1939," OUP Catalogue, Oxford University Press, number 9780195101133.
    5. Kevin H. O'Rourke & Jeffrey G. Williamson, 1995. "Open economy forces and late 19th century Scandinavian catch-up," Working Papers 199506, School of Economics, University College Dublin.
    6. Simon Kuznets & Elizabeth Jenks, 1961. "Appendices and Index to "Capital in the American Economy: Its Formation and Financing"," NBER Chapters,in: Capital in the American Economy: Its Formation and Financing, pages 465-664 National Bureau of Economic Research, Inc.
    7. Terence C. Mills, 2009. "Modelling trends and cycles in economic time series: historical perspective and future developments," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 3(3), pages 221-244, October.
    8. King, Robert G. & Rebelo, Sergio T., 1993. "Low frequency filtering and real business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 17(1-2), pages 207-231.
    9. Andrew Harvey, 2010. "The local quadratic trend model," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 29(1-2), pages 94-108.
    10. Nelson, Charles R., 1988. "Spurious trend and cycle in the state space decomposition of a time series with a unit root," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 475-488.
    11. Jean Luc Demeulemeester & Claude Diebolt, 2011. "Renouveler la science économique néo-classique ? Prendre l’historicité au sérieux," Working Papers 11-03, Association Française de Cliométrie (AFC).
    12. Rainer Metz, 2010. "Filter-design and model-based analysis of trends and cycles in the presence of outliers and structural breaks," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 4(1), pages 51-73, January.
    13. Richard E. Baldwin & Philippe Martin, 1999. "Two Waves of Globalisation: Superficial Similarities, Fundamental Differences," NBER Working Papers 6904, National Bureau of Economic Research, Inc.
    14. Hendry,David F. & Morgan,Mary S., 1997. "The Foundations of Econometric Analysis," Cambridge Books, Cambridge University Press, number 9780521588706, April.
    15. Durbin, James & Koopman, Siem Jan, 2012. "Time Series Analysis by State Space Methods," OUP Catalogue, Oxford University Press, edition 2, number 9780199641178.
    16. Simon Kuznets & Elizabeth Jenks, 1961. "Capital in the American Economy: Its Formation and Financing," NBER Books, National Bureau of Economic Research, Inc, number kuzn61-1, June.
    17. Thomas Piketty & Emmanuel Saez, 2006. "The Evolution of Top Incomes: A Historical and International Perspective," American Economic Review, American Economic Association, vol. 96(2), pages 200-205, May.
    18. Jutta Bolt & Jan Luiten Zanden, 2014. "The Maddison Project: collaborative research on historical national accounts," Economic History Review, Economic History Society, vol. 67(3), pages 627-651, August.
    19. Darne, Olivier & Diebolt, Claude, 2004. "Unit roots and infrequent large shocks: new international evidence on output," Journal of Monetary Economics, Elsevier, vol. 51(7), pages 1449-1465, October.
    20. Simon Kuznets & Elizabeth Jenks, 1961. "Introduction to "Capital in the American Economy: Its Formation and Financing"," NBER Chapters,in: Capital in the American Economy: Its Formation and Financing, pages 3-14 National Bureau of Economic Research, Inc.
    21. Victor Zarnowitz, 1992. "Business Cycles: Theory, History, Indicators, and Forecasting," NBER Books, National Bureau of Economic Research, Inc, number zarn92-1, June.
    22. Angus Maddison, 2007. "Fluctuations in the momentum of growth within the capitalist epoch," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 1(2), pages 145-175, July.
    23. Cogley, Timothy & Nason, James M., 1995. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series Implications for business cycle research," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 253-278.
    24. James H. Stock & Mark W. Watson, 1989. "New Indexes of Coincident and Leading Economic Indicators," NBER Chapters,in: NBER Macroeconomics Annual 1989, Volume 4, pages 351-409 National Bureau of Economic Research, Inc.
    25. Williamson, Jeffrey G., 1996. "Globalization, Convergence, and History," The Journal of Economic History, Cambridge University Press, vol. 56(02), pages 277-306, June.
    26. Feinstein, Charles H. & Temin, Peter & Toniolo, Gianni, 2008. "The World Economy between the World Wars," OUP Catalogue, Oxford University Press, number 9780195307559.
    27. Nerlove, Marc & Grether, David M. & Carvalho, José L., 1979. "Analysis of Economic Time Series," Elsevier Monographs, Elsevier, edition 1, number 9780125157506 edited by Shell, Karl.
    28. Rainer Metz, 2011. "Do Kondratieff waves exist? How time series techniques can help to solve the problem," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 5(3), pages 205-238, October.
    29. Patricio Sáiz, 2014. "Did patents of introduction encourage technology transfer? Long-term evidence from the Spanish innovation system," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 8(1), pages 49-78, January.
    30. Claude Diebolt, 2014. "Kuznets versus kondratieff An essay in historical macroeconometrics," Cahiers d’économie politique / Papers in Political Economy, L'Harmattan, issue 67, pages 81-118.
    31. Henning, Martin & Enflo, Kerstin & Andersson, Fredrik N.G., 2011. "Trends and cycles in regional economic growth," Explorations in Economic History, Elsevier, vol. 48(4), pages 538-555.
    32. James Foreman-Peck, 2007. "European Historical Economics and Globalisation," The Journal of Philosophical Economics, Bucharest Academy of Economic Studies, The Journal of Philosophical Economics, vol. 1(1), pages 23-53, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cendejas Bueno, José Luis & Castañeda, Juan Enrique & Muñoz, Félix, 2015. "Business cycles and monetary regimes in the U.S. (1960 – 2014): A plea for monetary stability," Working Papers in Economic Theory 2015/05, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
    2. Kufenko, Vadim, 2016. "Spurious periodicities in cliometric series: Simultaneous testing," Violette Reihe: Schriftenreihe des Promotionsschwerpunkts "Globalisierung und Beschäftigung" 48/2016, University of Hohenheim, Carl von Ossietzky University Oldenburg, Evangelisches Studienwerk.
    3. German Forero-Laverde, 2018. "A New Indicator for Describing Bull and Bear Markets," Working Papers 0129, European Historical Economics Society (EHES).

    More about this item

    Keywords

    Historical business cycles; Spectral analysis; Unobserved component models; Maddison’s time series;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:cliomt:v:11:y:2017:i:1:d:10.1007_s11698-015-0135-0. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.