Measuring Business Cycles: A Modern PerspectiveIn the first half of this century, special attention was given to two features of the business cycle: (1) the comovement of many individual economic series and (2) the different behavior of the economy during expansions and contractions. Both of these attributes were ignored in many subsequent business cycle models, which were often linear representations of a single macroeconomic aggregate. However, recent theoretical and empirical research has revived interest in each attribute separately. Notably, dynamic factor models have been used to obtain a single common factor from a set of macroeconomic variables, and nonlinear models have been used to describe the regime-switching nature of aggregate output. We survey these two strands of research and then provide some suggestive empirical analysis in an effort to unite the two literatures and to assess their usefulness in a statistical characterization of business- cycle dynamics. |
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aggregate American Economic Review Bureau of Economic Burns and Mitchell Business Cycle business-cycle dynamics cointegration Commerce Department Methodology common factor comovement Composite Coincident Index Composite Index Countercyclical density matrix Department of Economics Diebold Duration Dependence Durlauf dynamic factor model Econometrica Economic Fluctuations Economic Research empirical Employees on Nonagricultural Engle equilibrium Evidence example factor structure Four Coincident Indicators Growth Hamilton Hansen Index of Four Indexes of Coincident Journal of Political Kydland leads and lags Likelihood Ratio Test linear Macroeconomic Theory Manuscript Markets Markov process MEASURING BUSINESS CYCLES modified Commerce Department multiple equilibria National Bureau NBER NBER Working Paper Nonagricultural Payrolls nonlinearity null hypothesis Number Author(s Nx1 Nx1 output p²² Partial Subscription Political Economy regime switching regime-switching model Sargent Seasonally Adjusted Semi-Markov Process spectral density spillovers and strategic statistical stochastic Stock and Watson Stock-Watson strategic complementarities structure and regime switching model technology shock Testing time-varying transition probabilities turning points University vector autoregression