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Beverridge Nelson Decomposition With Markov Switching

  • Chin Nam Low
  • Heather Anderson

    ()

  • Ralph Snyder

This paper considers Beveridge-Nelson decomposition in a context where the permanent and transitory components both follow a Markov switching process. Our approach insorporates Markov switching into a single source of error state-space framework, allowing business cycle asymmetries and regime switches in the long-run multiplier.

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File URL: http://cbe.anu.edu.au/research/papers/camawpapers/Papers/2006/Chin_Anderson_Snyder_182006.pdf
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Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2006-18.

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Length: 21 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:een:camaaa:2006-18
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  1. 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, March.
  2. Anderson, Heather M. & Low, Chin Nam & Snyder, Ralph, 2006. "Single source of error state space approach to the Beveridge Nelson decomposition," Economics Letters, Elsevier, vol. 91(1), pages 104-109, April.
  3. Chen, Chao-Chun & Tsay, Wen-Jen, 2006. "The Beveridge-Nelson decomposition of Markov-switching processes," Economics Letters, Elsevier, vol. 91(1), pages 83-89, April.
  4. Robert Breunig & Serinah Najarian & Adrian Pagan, 2003. "Specification Testing of Markov Switching Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(s1), pages 703-725, December.
  5. Mankiw, N. Gregory & Campbell, John, 1987. "Permanent and Transitory Components in Macroeconomic Fluctuations," Scholarly Articles 3207697, Harvard University Department of Economics.
  6. Kim, Chang-Jin, 1994. "Dynamic linear models with Markov-switching," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 1-22.
  7. Margaret M. McConnell & Gabriel Perez Quiros, 1998. "Output fluctuations in the United States: what has changed since the early 1980s?," Staff Reports 41, Federal Reserve Bank of New York.
  8. Chang-Jin Kim & Jeremy M. Piger & Richard Startz, 2007. "The Dynamic Relationship between Permanent and Transitory Components of U.S. Business Cycles," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(1), pages 187-204, 02.
  9. Beveridge, Stephen & Nelson, Charles R., 1981. "A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the `business cycle'," Journal of Monetary Economics, Elsevier, vol. 7(2), pages 151-174.
  10. Chang-Jin Kim & Christian J. Murray, 2002. "Permanent and transitory components of recessions," Empirical Economics, Springer, vol. 27(2), pages 163-183.
  11. James C. Morley & Charles Nelson & Eric Zivot, 2000. "Why Are Beveridge-Nelson and Unobserved-Component Decompositions of GDP So Different?," Working Papers 0013, University of Washington, Department of Economics.
  12. Andrew Harvey & Siem Jan Koopman, 2000. "Signal extraction and the formulation of unobserved components models," Econometrics Journal, Royal Economic Society, vol. 3(1), pages 84-107.
  13. Simon M. Potter, 1993. "A Nonlinear Approach to U.S. GNP," UCLA Economics Working Papers 693, UCLA Department of Economics.
  14. 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 357-84, March.
  15. Goldfeld, Stephen M. & Quandt, Richard E., 1973. "A Markov model for switching regressions," Journal of Econometrics, Elsevier, vol. 1(1), pages 3-15, March.
  16. Sichel, Daniel E, 1994. "Inventories and the Three Phases of the Business Cycle," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 269-77, July.
  17. Luginbuhl, Rob & de Vos, Aart, 1999. "Bayesian Analysis of an Unobserved-Component Time Series Model of GDP with Markov-Switching and Time-Varying Growths," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(4), pages 456-65, October.
  18. Stock, James H & Watson, Mark W, 1988. "Variable Trends in Economic Time Series," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 147-74, Summer.
  19. Shami, R.G. & Forbes, C.S., 2000. "A structural Time Series Model with Markov Switching," Monash Econometrics and Business Statistics Working Papers 10/00, Monash University, Department of Econometrics and Business Statistics.
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