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When did the 2001 recession really start?

Author

Listed:
  • J. Polzehl

    (Weierstrass Institute for Applied Analysis & Stochastics)

  • V. Spokoiny

    (Weierstrass Institute for Applied Analysis & Stochastics & Humbold University)

  • C. Starica

    (Dept. Mathematical Statistics, Chalmers University of Technology)

Abstract

The paper develops a non-parametric, non-stationary framework for business-cycle dating based on an innovative statistical methodology known as Adaptive Weights Smoothing (AWS). The methodology is used both for the study of the individual macroeconomic time series relevant to the dating of the business cycle as well as for the estimation of their joint dynamic. Since the business cycle is defined as the common dynamic of some set of macroeconomic indicators, its estimation depends fundamentally on the group of series monitored. We apply our dating approach to two sets of US economic indicators including the monthly series of industrial production, nonfarm payroll employment, real income, wholesale-retail trade and gross domestic product (GDP). We find evidence of a change in the methodology of the NBER's Business- Cycle Dating Committee: an extended set of five monthly macroeconomic indicators replaced in the dating of the last recession the set of indicators emphasized by the NBER's Business-Cycle Dating Committee in recent decades. This change seems to seriously affect the continuity in the outcome of the dating of business cycle. Had the dating been done on the traditional set of indicators, the last recession would have lasted one year and a half longer. We find that, independent of the set of coincident indicators monitored, the last economic contraction began in November 2000, four months before the date of the NBER's Business-Cycle Dating Committee.

Suggested Citation

  • J. Polzehl & V. Spokoiny & C. Starica, 2004. "When did the 2001 recession really start?," Econometrics 0411017, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpem:0411017
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    References listed on IDEAS

    as
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    Keywords

    business cycle; non-parametric smoothing; non-stationarity;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • 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

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