Business Cycles Across Space and Time

Neville Francis, Michael Owyang and Daniel Soques ()

No 2019-010, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We study the comovement of international business cycles in a time series clustering model with regime-switching. We extend the framework of Hamilton and Owyang (2012) to include time-varying transition probabilities to determine what drives similarities in business cycle turning points. We find four groups, or "clusters", of countries which experience idiosyncratic recessions relative to the global cycle. Additionally, we find the primary indicators of international recessions to be fluctuations in equity markets and geopolitical uncertainty. In out-of-sample forecasting exercises, we find that our model is an improvement over standard benchmark models for forecasting both aggregate output growth and country-level recessions.

Keywords: Markov-switching; time-varying transition probabilities; cluster analysis (search for similar items in EconPapers)
JEL-codes: C11 C32 E32 F44 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2019-01-22, Revised 2021-05-05
New Economics Papers: this item is included in nep-ets and nep-mac
Note: Publisher DOI: https://doi.org/10.1111/jmcb.12860
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Citations: View citations in EconPapers (5)

Published in Journal of Money, Credit, and Banking

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Journal Article: Business Cycles across Space and Time (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:2019-010

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DOI: 10.20955/wp.2019.010

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