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Real vs. nominal cycles: a multistate Markov-switching bi-factor approach

Real vs. nominal cycles: a multistate Markov-switching bi-factor approach Abstract This paper proposes a probabilistic model based on comovements and nonlinearities useful to assess the type of shock affecting each phase of the business cycle. By providing simultaneous inferences on the phases of real activity and inflation cycles, contractionary episodes are dated and categorized into demand, supply and mix recessions. The impact of shocks originated in the housing market over the business cycle is also assessed, finding that recessions are usually accompanied by housing deflationary pressures, while expansions are mainly influenced by housing demand shocks, with the only exception occurred during the period surrounding the “Great Recession,” affected by expansionary housing supply shocks. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Studies in Nonlinear Dynamics & Econometrics de Gruyter

Real vs. nominal cycles: a multistate Markov-switching bi-factor approach

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Publisher
de Gruyter
Copyright
Copyright © 2014 by the
ISSN
1081-1826
eISSN
1558-3708
DOI
10.1515/snde-2012-0002
Publisher site
See Article on Publisher Site

Abstract

Abstract This paper proposes a probabilistic model based on comovements and nonlinearities useful to assess the type of shock affecting each phase of the business cycle. By providing simultaneous inferences on the phases of real activity and inflation cycles, contractionary episodes are dated and categorized into demand, supply and mix recessions. The impact of shocks originated in the housing market over the business cycle is also assessed, finding that recessions are usually accompanied by housing deflationary pressures, while expansions are mainly influenced by housing demand shocks, with the only exception occurred during the period surrounding the “Great Recession,” affected by expansionary housing supply shocks.

Journal

Studies in Nonlinear Dynamics & Econometrics – de Gruyter

Published: Dec 1, 2014

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