Bayesian Analysis of an Unobserved-Component Time Series Model of GDP with Markov-Switching and Time-Varying Growths

Rob Luginbuhl and Aart de Vos

Journal of Business & Economic Statistics, 1999, vol. 17, issue 4, 456-65

Abstract: We propose an unobserved-component time series model of gross domestic product that includes Markov switching as an unobserved component. In addition to a trend component, the model has two time-varying drift components. One drift represents the expected rate of growth during recession; the other drift represents the expected rate during expansion. Estimates indicate a substantial decline in the latter annual rate for the United States from 6.4% in 1950 to 3.6% by 1990. We have employed weak priors based on prewar data. The estimation makes use of the Gibbs sampler and the Metropolis algorithm.

Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:17:y:1999:i:4:p:456-65

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