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Modelling Business Cycle Features Using Switching Regime Models

  • Hans-Martin Krolzig
  • Michael P. Clements

The ability of Markov-switching (MS) autoregressive models to replicate selected classical business-cycle features found in US post-war consumption, investment and output is compared to that of linear models. Univariate MS models appear to offer more dynamically parsimonious representations, but generally are unable to reproduce features missed by linear models. In the multivariate models, some cointegration restrictions were found to have a crucial impact, and the ability of models that imposed cointegration to reproduce business cycle features was enhanced by Markov-switching

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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 58.

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Date of creation: 01 Jan 2001
Date of revision:
Handle: RePEc:oxf:wpaper:58
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  1. Pagan, Adrian, 1997. "Policy, Theory, and the Cycle," Oxford Review of Economic Policy, Oxford University Press, vol. 13(3), pages 19-33, Autumn.
  2. Francis X. Diebold & Glenn D. Rudebusch, 1994. "Measuring Business Cycles: A Modern Perspective," NBER Working Papers 4643, National Bureau of Economic Research, Inc.
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  8. Hess, Gregory D & Iwata, Shigeru, 1997. "Measuring and Comparing Business-Cycle Features," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(4), pages 432-44, October.
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  10. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
  11. Krolzig, Hans-Martin & Sensier, Marianne, 2000. "A Disaggregated Markov-Switching Model of the Business Cycle in UK Manufacturing," Manchester School, University of Manchester, vol. 68(4), pages 442-60, Special I.
  12. Robert G. King & Charles I. Plosser, 1989. "Real business cycles and the test of the Adelmans," Proceedings, Federal Reserve Bank of San Francisco.
  13. Ravn, Morten O. & Sola, Martin, 1995. "Stylized facts and regime changes: Are prices procyclical?," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 497-526, December.
  14. Acemoglu, Daron & Scott, Andrew, 1994. "Asymmetries in the Cyclical Behaviour of UK Labour Markets," Economic Journal, Royal Economic Society, vol. 104(427), pages 1303-23, November.
  15. Cogley, Timothy & Nason, James M, 1995. "Output Dynamics in Real-Business-Cycle Models," American Economic Review, American Economic Association, vol. 85(3), pages 492-511, June.
  16. Gerhard Bry & Charlotte Boschan, 1971. "Foreword to "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs"," NBER Chapters, in: Cyclical Analysis of Time Series: Selected Procedures and Computer Programs, pages -1 National Bureau of Economic Research, Inc.
  17. Michael P. Clements & Hans-Martin Krolzig, 1998. "A comparison of the forecast performance of Markov-switching and threshold autoregressive models of US GNP," Econometrics Journal, Royal Economic Society, vol. 1(Conferenc), pages C47-C75.
  18. Hamilton, James D & Gang, Lin, 1996. "Stock Market Volatility and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(5), pages 573-93, Sept.-Oct.
  19. Gerhard Bry & Charlotte Boschan, 1971. "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs," NBER Books, National Bureau of Economic Research, Inc, number bry_71-1.
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