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Real vs. Nominal Cycles: A Multistate Markov-Switching Bi-Factor Approach

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  • Leiva-Leon, Danilo

Abstract

This paper proposes a probabilistic model based on comovements and nonlinearities useful to assess the type of shock affecting each phase of the business cycle. By providing simultaneous inferences on the phases of real activity and inflation cycles, contractionary episodes are dated and categorized into demand, supply and mix recessions. The impact of shocks originated in the housing market over the business cycle is also assessed, finding that recessions are usually accompanied by housing deflationary pressures, while expansions are mainly influenced by housing demand shocks, with the only exception occurred during the period surrounding the "Great Recession," affected by expansionary housing supply shocks.

Suggested Citation

  • Leiva-Leon, Danilo, 2013. "Real vs. Nominal Cycles: A Multistate Markov-Switching Bi-Factor Approach," MPRA Paper 54456, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:54456
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Leiva-Leon, Danilo, 2013. "A New Approach to Infer Changes in the Synchronization of Business Cycle Phases," MPRA Paper 54452, University Library of Munich, Germany.
    2. William A. Barnett & Marcelle Chauvet & Danilo Leiva-Leon, 2014. "Real-Time Nowcasting of Nominal GDP Under Structural Breaks," Staff Working Papers 14-39, Bank of Canada.
    3. Danilo Leiva-Leon, 2017. "Measuring Business Cycles Intra-Synchronization in US: A Regime-switching Interdependence Framework," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(4), pages 513-545, August.
    4. Barnett, William A. & Chauvet, Marcelle & Leiva-Leon, Danilo, 2016. "Real-time nowcasting of nominal GDP with structural breaks," Journal of Econometrics, Elsevier, vol. 191(2), pages 312-324.
    5. Maximo Camacho & Danilo Leiva-Leon & Gabriel Perez-Quiros, 2016. "Country Shocks, Monetary Policy Expectations and ECB Decisions. A Dynamic Non-linear Approach," Advances in Econometrics,in: Dynamic Factor Models, volume 35, pages 283-316 Emerald Publishing Ltd.
    6. William Barnett & Marcelle Chauvetz & Danilo Leiva-Leonx, "undated". "Real-Time Nowcasting Nominal GDP Under Structural Break," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201313, University of Kansas, Department of Economics.

    More about this item

    Keywords

    Business Cycles; Inflation Cycles; Housing Price Cycles; Dynamics Factors; Markov-Switching.;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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