Real vs. nominal cycles: a multistate Markov-switching bi-factor approach

Studies in Nonlinear Dynamics & Econometrics, 2014, vol. 18, issue 5, 557-580

Abstract: This paper proposes a probabilistic model based on comovements and nonlinearities useful to assess the type of shock affecting each phase of the business cycle. By providing simultaneous inferences on the phases of real activity and inflation cycles, contractionary episodes are dated and categorized into demand, supply and mix recessions. The impact of shocks originated in the housing market over the business cycle is also assessed, finding that recessions are usually accompanied by housing deflationary pressures, while expansions are mainly influenced by housing demand shocks, with the only exception occurred during the period surrounding the “Great Recession,” affected by expansionary housing supply shocks.

Keywords: business cycles; dynamics factors; housing price cycles; inflation cycles; Markov-switching (search for similar items in EconPapers)
JEL-codes: C22 E27 E32 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (17)

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Working Paper: Real vs. Nominal Cycles: A Multistate Markov-Switching Bi-Factor Approach (2013)
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DOI: 10.1515/snde-2012-0002

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