Many macroeconomic variables exhibit Markov regime-switching characteristic, and the latent state variable controlling regime change is endogenous. This paper shows that if the regressor is endogenously switching, the OLS estimator of the regression coefficients will be biased. A simple two-step...

Short-term analysis is generally performed with seasonally adjusted data from which further estimation of the business cycle is performed through well-known filters (HP, Baxter-King). However, the whole procedure is not fully consistent, because seasonal adjustment and trend-cycle estimation do...

This paper investigates the properties of the decomposition of a time series presented in a companion paper (Lacroix, (2008)). The procedure relies upon an extension of Beveridge-Nelson methodology. We focus on its empirical implementation and show the need for additional steps in order to...

A growing body of literature argues that the financial cycle is considerably longer in duration and larger in amplitude than the business cycle and that its distinguishing features became more pronounced over time. This paper proposes an empirical approach suitable to test these hypotheses. We...

A growing body of literature argues that the financial cycle is considerably longer in duration and larger in amplitude than the business cycle and that its distinguishing features became more pronounced over time. This paper proposes an empirical approach suitable to test these hypothe- ses. We...

A growing number of empirical studies provides evidence that dynamic properties of macroeconomic time series have been changing over time. Model-based procedures for the measurement of business cycles should therefore allow model parameters to adapt over time. In this paper the time dependencies...

This paper introduces parametric spectrum estimation to the analysis of financial cycles. Our contribution is to formally test properties of financial cycles and to characterize their international interaction in the frequency domain. Existing work argues that the financial cycle is considerably...

The authors use first differenced logged quarterly series for the GDP of 29 countries and the euro area to assess the need to use nonlinear models to describe business cycle dynamic behaviour. Their approach is model (estimation)-free, based on testing only. The authors aim to maximize power to...

The dynamic properties of micro based stochastic macro models are often analyzed through a linearization around the associated deterministic steady state. Recent literature has investigated the error made by such a deterministic approximation. Complementary to this literature we investigate how...

We establish that the Phillips curve is persistence-dependent: inflation responds differently to persistent versus moderately persistent (or versus transient) fluctuations in the unemployment gap. Previous work fails to model this dependence, so it finds numerous “inflation puzzles”—such...