Using the conventional VAR identification approach, Cochrane (Quarterly Journal of Economics 107: 241-65, 1994) finds that substantial amounts of variation in GDP growth and stock returns are due to transitory shocks. Following the common trend decomposition of King etal. (American Economic...

The per iodic structure of business cycles suggests that significant asymmetries are present over different phases of the cycle. This paper uses markov regime-switching models with fixed and duration dependent transition probabilities to directly model expansions, contractions and durations in...