Measuring and Predicting Heterogeneous Recessions

Arbeitspapier

This paper conducts an empirical analysis of the heterogeneity of recessions in monthly U.S. coincident and leading indicator variables. Univariate Markovswitching models indicate that it is appropriate to allow for two distinct recession regimes, corresponding with 'mild' and 'severe' recessions. All downturns start with a mild decline in the level of economic activity. Contractions that develop into severe recessions mostly correspond with periods of substantial credit squeezes as suggested by the 'financial accelerator' theory. Multivariate Markov-switching models that allow for phase shifts between the cyclical regimes of industrial production and the Conference Board Leading Economic Index confirm these findings.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 1206

Classification and Topics

• Classification: Wirtschaft ; Bayesian Analysis: General ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Model Construction and Estimation ; Model Evaluation, Validation, and Selection ; Business Fluctuations; Cycles
• Subject: Business cycle ; phase shifts ; regime-switching models ; Bayesian analysis ; Konjunktur ; Markov-Kette ; Bayes-Statistik ; Schätzung ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Çakmaklı, Cem ; Paap, Richard ; van Dijk, Dick
• Event: Veröffentlichung
• (who): Koç University-TÜSİAD Economic Research Forum (ERF)
• (where): Istanbul
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/108590