Cyclical Dynamics of Industrial Production and Employment: Markov Chain-based Estimates and Tests (original) (raw)

A New Approach to the Analysis of Business Cycle Transitions in a Model of Output and Employment

2001

This paper proposes a new framework for the impulse-response analysis of business cycle transitions. A cointegrated vector autoregressive Markov-switching model is found to be a congruent representation of post-war US employment and output data. In this model some parameters change according to the phase of the business cycle which effects employment and output simultaneously. The long run dynamics are characterized by a cointegrating vector including employment, output and a trend as a proxy for technological progress and capital accumulation. Short-run and long-run dynamics are jointly estimated in a Markov-switching vector-equilibrium-correction model with three regimes representing recession, growth and high growth. For the analysis of the dynamics of output and employment, a new set of impulse-response exercises is considered.

"International Business Cycles: G7 and OECD Countries IBC_ER.pdf

Monitoring economic activity through the use of composite leading and coin-cident indicators has been a tradition in the United States for over sixty years, since the seminal book by Arthur Burns and Wesley Mitchell (1946). These indicators are some of the most watched series by the press, businesses, policy-makers, and stock market participants. Progressive globalization has sparked a worldwide interest in using economic indicators to analyze cyclical fluctuations. The development of the European Monetary Union and advances in econometric models that explore potential dynamic differences across business cycle phases have given rise to a large recent literature focused on economic indicators and inferences on turning points for European countries. As markets become more integrated, governments and the private sector seek to conduct their activities in light of both national and international economic conditions. Changes in exchange rates, output, consumption, inflation, and interest rates in different parts of the world can influence the effectiveness of government policies and the competitive position of businesses, even those not directly related to international operations. The benefits of a warning system to detect recessions in major economic partners and in industrialized countries as a whole are considerable. The more reliable the warning system is, the more efficiently economic policy can be implemented as a pre-emptive action against the negative effects of widespread economic weakness and unemployment. Private businesses also benefit from making decisions based on more complete information regarding demand and supply for their services. This article constructs an international business cycle indicator using a broad production measure of the G7 countries and the Organisation for Economic Cooperation and Development (OECD) member countries. 1 It also builds national business cycle indicators for each of the G7 countries individually using series that comove with their aggregate economic activity. A dynamic factor model with Markov switching (DFMS) is used to combine these macroeconomic series and to estimate probabilities of current

Modelling and Analyzing Turkish Business Cycles through Markov-Switching Models

Business and Economic Research

This study uses the different versions of the Markov-Switching methodology for modeling business cycles in Turkey and determining their turning points through quarterly real GDP figures for the 1987-2021 period. Based on the results obtained from the models, the recovery periods in Turkey last approximately 8.5 quarters and exhibit long and permanent nature while contraction periods are short, variable, and temporary, lasting around 4 quarters on average. The estimated Markov-Switching models mostly produce the same turning points. The compatibility of the obtained results with the national and international developments experienced during the analyzing period indicates the consistency of the developed models. On the other hand, the results reveal the importance of consistent and credible monetary and fiscal policies in smoothing business cycles.