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...

This paper evaluates the ability of a statistical regime-switching model to identify turning points in U.S. economic activity in real time. The authors work with a Markov-switching model fit to real gross domestic product and employment data that, when estimated on the entire postwar sample,...

This paper examines the determinants of employment growth in metro areas. To obtain growth rates, we use a Markov-switching model that separates a city’s growth path into two distinct phases (high and low), each with its own growth rate. The simple average growth rate over some period is,...

The U.S. aggregate business cycle is often characterized as a series of distinct recession and expansion phases. We apply a regime-switching model to state-level coincident indexes to characterize state business cycles in this way. We find that states differ a great deal in the levels of growth...

The national economy is often described as having a business cycle over which aggregate output enters and exits distinct expansion and recession phases. Analogously, national employment cycles in and out of its own expansion and contraction phases, which are closely related to the business...

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....

This paper evaluates the ability of formal rules to establish U.S. business cycle turning point dates in real time. We consider two approaches, a nonparametric algorithm and a parametric Markov-switching dynamic-factor model. In order to accurately assess the real-time performance of these...