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Measuring Business Cycles with Business-Cycle Models

  • Allan W. Gregory
  • Gregor W. Smith

Business cycles may be defined or measured by parametrizing detrending filters to maximize the ability of a business-cycle model to match the moments of the remaining cycles. Thus a theory can be used to guide cycle measurement. We present two applications to U.S. postwar data. In the first application the cycles are measured with a standard, real business cycle model. In the second, they are measured using information on capacity utilization and unemployment rates. Simulation methods are used to describe the properties of the GMM estimators and to allow exact inference.

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Paper provided by Queen's University, Department of Economics in its series Working Papers with number 901.

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Length: 21 pages
Date of creation: May 1994
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Handle: RePEc:qed:wpaper:901
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  9. Victor Zarnowitz, 1992. "Business Cycles: Theory, History, Indicators, and Forecasting," NBER Books, National Bureau of Economic Research, Inc, number zarn92-1, September.
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  19. Donald W.K. Andrews, 1988. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Cowles Foundation Discussion Papers 877R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1989.
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