Identifying Canadian Regional Business Cycles using the Friedmand Plucking Model

Gabriel Rodríguez

No 0309E, Working Papers from University of Ottawa, Department of Economics

Abstract: Following the methodology used by Kim and Nelson (1999b), I find estimates of the permanent and transitory components for Canadian regions based on the Friedman model of business fluctuations. The empirical results support the theoretical predictions that negative transitory shocks hit the economy putting down the real regional output. After that, the regional economy enters in a recovery phase and after this it is operating again near to the trend ceiling level. Using the estimated filtered probabilities, a chronology of the regional business cycles is presented. It shows that there are clear and particular episodes corresponding to the regional dynamics which are not necessarily present at the aggregate level.

Keywords: Business Regional Fluctuations; Markov Switching; Transitory and Permanent Components (search for similar items in EconPapers)
JEL-codes: C22 E32 R00 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2003
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