The Dynamic Relationship between Permanent and Transitory Components of U.S. Business Cycles

Chang-Jin Kim (), Jeremy Piger and Richard Startz

Journal of Money, Credit and Banking, 2007, vol. 39, issue 1, 187-204

Abstract: This paper investigates the dynamic relationship between permanent and transitory components of post-war U.S. business cycles. We specify a time-series model for real GNP and consumption in which the two share a common stochastic trend and transitory component, and Markov-regime switching is used to model business cycle phases in these components. The timing of switches between business cycle phases is allowed to differ across the permanent and transitory components. We find strong evidence of a lead-lag relationship between the switches in the two components. Specifically, switches in the permanent component leads switches in the transitory component when entering recessions. Copyright 2007 The Ohio State University.

Date: 2007
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Related works:
Journal Article: The Dynamic Relationship between Permanent and Transitory Components of U.S. Business Cycles (2007)
Working Paper: The dynamic relationship between permanent and transitory components of U.S. business cycles (2005)
Working Paper: The Dynamic Relationship Between Permanent and Transitory Components of U.S. Business Cycle (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:39:y:2007:i:1:p:187-204

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