Using a Bayesian model comparison strategy, we search for a volatility reduction within the post-war sample for the growth rates of U.S. aggregate and disaggregate real GDP. We find that the growth rate of aggregate real GDP has been less volatile since the early 1980s, and that this volatility...

This paper investigates the nature of U.S. business cycle asymmetry using a dynamic factor model of output, investment, and consumption. We identify a common stochastic trend and common transitory component by embedding the permanent income hypothesis within a simple growth model....

Following Hamilton (1989), estimation of Markov regime-switching regressions nearly always relies on the assumption that the latent state variable controlling the regime change is exogenous. We incorporate endogenous switching into a Markov-switching regression and develop strategies for...

We investigate the importance of trend inflation and the real-activity gap for explaining observed inflation variation in G7 countries since 1960. Our results are based on a bivariate unobserved-components model of inflation and unemployment in which inflation is decomposed into a stochastic...

In this paper, we present a new approach to trend/cycle decomposition under the assumption that the trend is the permanent component and the cycle is the transitory component of an integrated time series. The permanent component is defined as the steady-state level of the series, a definition...

This paper considers the ability of simulated data from linear and nonlinear time-series models to reproduce features in U.S. real GDP data related to business cycle phases. We focus our analysis on a number of linear ARIMA models and nonlinear Markov-switching models. To determine the timing of...

This paper presents a new nonlinear time series model that captures a post-recession “bounce-back” in the level of aggregate output. While a number of studies have examined this type of business cycle asymmetry using recession-based dummy variables and threshold models, we relate the...

We apply both classical and Bayesian econometric methods to characterize the dynamic behavior of inflation for twelve industrial countries over the period 1984-2003, using four different price indices for each country. In particular, we estimate a univariate autoregressive (AR) model for each...

We distinguish between three different ways of using real-time data to estimate forecasting equations and argue that the most popular approach should generally be avoided. The point is illustrated with a model that uses monthly industrial production, employment, and retail sales data to predict...

This paper examines and compares the recent business cycle experiences of the seven states that lie partly or wholly within the Eighth Federal Reserve District (Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri, and Tennessee). For the period surrounding the 1990-91 NBER recession,...