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A contribution to the analysis of historical economic fluctuations (1870-2010): filtering, spurious cycles and unobserved component modelling

Author

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  • Cendejas Bueno, José Luis

    () (Instituto de Investigaciones Económicas y Sociales Francisco de Vitoria)

  • Muñoz, Félix

    () (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)

  • Fernández-de-Pinedo, Nadia

    () (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)

Abstract

Time series filtering methods such as the Hodrick-Prescott (HP) filter, with a consensual choice of the smoothing parameter, eliminate the possibility of identifying long swing cycles (e.g., Kondratieff type) or, alternatively, may distort periodicities that are in fact present in the data, giving rise, for example, to spurious Kuznets-type cycles. In this paper, we propose filtering Maddison’s time series for the period 1870-2010 for a selection of developed countries using a less restrictive filtering technique that does not impose but rather estimates the cut-off frequency. In particular, we use unobserved component models that optimally estimate the smoothing parameter. Using this methodology, we identify cycles of periods mainly in the range of 4-7 years (Juglar type cycles), as well as a pattern of cyclical convergence that deepens with globalization processes. After 1950, a common business cycle factor grouping all economies is found.

Suggested Citation

  • Cendejas Bueno, José Luis & Muñoz, Félix & Fernández-de-Pinedo, Nadia, 2015. "A contribution to the analysis of historical economic fluctuations (1870-2010): filtering, spurious cycles and unobserved component modelling," Working Papers in Economic Theory 2015/04, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
  • Handle: RePEc:uam:wpaper:201504
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    References listed on IDEAS

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    Cited by:

    1. Cendejas Bueno, José Luis & Castañeda, Juan Enrique & Muñoz, Félix, 2015. "Business cycles and monetary regimes in the U.S. (1960 – 2014): A plea for monetary stability," Working Papers in Economic Theory 2015/05, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
    2. Kufenko, Vadim, 2016. "Spurious periodicities in cliometric series: Simultaneous testing," Violette Reihe: Schriftenreihe des Promotionsschwerpunkts "Globalisierung und Beschäftigung" 48/2016, University of Hohenheim, Carl von Ossietzky University Oldenburg, Evangelisches Studienwerk.
    3. German Forero-Laverde, 2018. "A New Indicator for Describing Bull and Bear Markets," Working Papers 0129, European Historical Economics Society (EHES).

    More about this item

    Keywords

    historical business cycles; spectral analysis; unobserved component models; Maddison’s time series.;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations

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