Extracting a robust US business cycle using a time-varying multivariate model-based bandpass filter

Drew Creal, Siem Jan Koopman and Eric Zivot
Additional contact information
Eric Zivot: Department of Economics, University of Washington, Seattle, WA, USA, Postal: Department of Economics, University of Washington, Seattle, WA, USA

Journal of Applied Econometrics, 2010, vol. 25, issue 4, 695-719

Abstract: We develop a flexible business cycle indicator that accounts for potential time variation in macroeconomic variables. The coincident economic indicator is based on a multivariate trend cycle decomposition model and is constructed from a moderate set of US macroeconomic time series. In particular, we consider an unobserved components time series model with a common cycle that is shared across different time series but adjusted for phase shift and amplitude. The extracted cycle can be interpreted as a model-based bandpass filter and is designed to emphasize the business cycle frequencies that are of interest to applied researchers and policymakers. Stochastic volatility processes and mixture distributions for the irregular components and the common cycle disturbances enable us to account for the heteroskedasticity present in the data. Forecasting results are presented for a set of different specifications. Point forecasts from the preferred model indicate a future recession with the uncertainty over the business cycle growing quickly as the forecast horizon increases. Copyright © 2010 John Wiley & Sons, Ltd.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://hdl.handle.net/10.1002/jae.1185 Link to full text; subscription required (text/html)
http://qed.econ.queensu.ca:80/jae/2010-v25.4/ Supporting data files and programs (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:jae:japmet:v:25:y:2010:i:4:p:695-719

Ordering information: This journal article can be ordered from
http://www3.intersci ... e.jsp?issn=0883-7252

DOI: 10.1002/jae.1185

Access Statistics for this article

Journal of Applied Econometrics is currently edited by M. Hashem Pesaran

More articles in Journal of Applied Econometrics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().