Unobserved Leading and Coincident Common Factors in the Post-War U.S. Business Cycle
The paper introduces a two-factor model of the common leading and coincident economic indicators. Both factors are unobserved and each of them captures the dynamics of a corresponding group of the observed time series. The common leading factor is assumed to Granger-cause the common coincident factor. This property is used to estimate these two factors simultaneously and hence more efficiently. Two models of the latent leading and coincident factors are studied : a model with linear dynamics and a model with Markov-switching dynamics introduced through the leading factor intercept term. Moreover, a possibility of the individual leading variables having different leads over the common coincident indicator is considered. These models - both with linear and with regime-switching dynamics - were applied to the US monthly macroeconomic time series. The business cycle dating resulting from the nonlinear model closely corresponds to the NBER chronology and leads its turning points by 3-5 months.
|Date of creation:||01 Jan 2002|
|Contact details of provider:|| Postal: Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium)|
Fax: +32 10473945
Web page: http://www.uclouvain.be/ires
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Roberto S. Mariano & Yasutomo Murasawa, 2003. "A new coincident index of business cycles based on monthly and quarterly series," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(4), pages 427-443.
- Kim, C-J., 1991.
"Dynamic Linear Models with Markov-Switching,"
91-8, York (Canada) - Department of Economics.
- Francis X. Diebold & Glenn D. Rudebusch, 1994.
"Measuring Business Cycles: A Modern Perspective,"
NBER Working Papers
4643, National Bureau of Economic Research, Inc.
- Chauvet, Marcelle, 1998. "An Econometric Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 969-996, November.
- Chang-Jin Kim & Charles R. Nelson, 1999. "State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262112388.
- Chauvet, Marcelle & Potter, Simon, 2000. "Coincident and leading indicators of the stock market," Journal of Empirical Finance, Elsevier, vol. 7(1), pages 87-111, May.
- James H. Stock & Mark W. Watson, 1988. "A Probability Model of The Coincident Economic Indicators," NBER Working Papers 2772, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:ctl:louvir:2002008. 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: (Anne DAVISTER-LOGIST)
If references are entirely missing, you can add them using this form.