A new approach to dating the reference cycle
Maximo Camacho (),
María Gadea () and
Ana Gómez-Loscos ()
No 1914, Working Papers from Banco de España
This paper proposes a new approach to the analysis of the reference cycle turning points, defined on the basis of the specific turning points of a broad set of coincident economic indicators. Each individual pair of specific peaks and troughs from these indicators is viewed as a realization of a mixture of an unspecified number of separate bivariate Gaussian distributions whose different means are the reference turning points. These dates break the sample into separate reference cycle phases, whose shifts are modeled by a hidden Markov chain. The transition probability matrix is constrained so that the specification is equivalent to a multiple changepoint model. Bayesian estimation of finite Markov mixture modeling techniques is suggested to estimate the model. Several Monte Carlo experiments are used to show the accuracy of the model to date reference cycles that suffer from short phases, uncertain turning points, small samples and asymmetric cycles. In the empirical section, we show the high performance of our approach to identifying the US reference cycle, with little difference from the timing of the turning point dates established by the NBER. In a pseudo real-time analysis, we also show the good performance of this methodology in terms of accuracy and speed of detection of turning point dates.
Keywords: business cycles; turning points; finite mixture models (search for similar items in EconPapers)
JEL-codes: C22 E27 E32 (search for similar items in EconPapers)
Pages: 36 pages
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://www.bde.es/f/webbde/SES/Secciones/Publicac ... /19/Fich/dt1914e.pdf First version, May 2019 (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1914
Access Statistics for this paper
More papers in Working Papers from Banco de España Contact information at EDIRC.
Bibliographic data for series maintained by María Beiro. Electronic Dissemination of Information Unit. Research Department. Banco de España ().