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Structural testing of Business Cycles

Author

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  • Esa Mangeloja

    (University of Jyvaskyla)

Abstract

In this article, the predictability performance of certain classical business cycle theories are tested against contemporary statistical methods by using Finnish macroeconomic data. Keynesian multiplier- accelerator model derivatives and neo-classical real business cycle models are compared to statistical stochastic time-series methods. Some philosophical considerations on the scientific principles and macroeconomic analysis are extended for applied econometric practice. VAR and SUTSE models are estimated and compared against classical theory implications. It is found that in this case, SUTSE model has a superior forecasting ability and that pure statistical algorithms are the most efficient alternatives for predicting Finnish business cycle data.

Suggested Citation

  • Esa Mangeloja, 2003. "Structural testing of Business Cycles," Macroeconomics 0308004, EconWPA.
  • Handle: RePEc:wpa:wuwpma:0308004
    Note: Type of Document - pdf; prepared on PC- LaTex; pages: 20 ; figures: included
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    File URL: http://econwpa.repec.org/eps/mac/papers/0308/0308004.pdf
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    References listed on IDEAS

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    3. McCloskey, Donald N, 1983. "The Rhetoric of Economics," Journal of Economic Literature, American Economic Association, vol. 21(2), pages 481-517, June.
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    6. Lucas, Robert E, Jr, 1980. "Methods and Problems in Business Cycle Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(4), pages 696-715, November.
    7. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    8. Sims, Christopher A & Uhlig, Harald, 1991. "Understanding Unit Rooters: A Helicopter Tour," Econometrica, Econometric Society, vol. 59(6), pages 1591-1599, November.
    9. Pierre Danthine, Jean & Donaldson, John B., 1993. "Methodological and empirical issues in real business cycle theory," European Economic Review, Elsevier, vol. 37(1), pages 1-35, January.
    10. Hommes, Cars H., 1995. "A reconsideration of Hicks' non-linear trade cycle model," Structural Change and Economic Dynamics, Elsevier, vol. 6(4), pages 435-459, December.
    11. Christoph Schleicher, 2003. "Structural Time-Series Models with Common Trends and Common Cycles," Computing in Economics and Finance 2003 108, Society for Computational Economics.
    12. Christopher A. Sims, 1996. "Macroeconomics and Methodology," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 105-120, Winter.
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    More about this item

    Keywords

    Business Cycle; Real Business Cycle Theory; VAR; SUTSE; multiplier-acceleration;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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