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A New Approach to the Analysis of Business Cycle Transitions in a Model of Output and Employment

Hans-Martin Krolzig () and Juan Toro

No 59, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: This paper proposes a new framework for the impulse-response analysis of business cycle transitions. A cointegrated vector autoregressive Markov-switching model is found to be a congruent representation of post-war US employment and output data. In this model some parameters change according to the phase of the business cycle which effects employment and output simultaneously. The long run dynamics are characterized by a cointegrating vector including employment, output and a trend as a proxy for technological progress and capital accumulation. Short-run and long-run dynamics are jointly estimated in a Markov-switching vector-equilibrium-correction model with three regimes representing recession, growth and high growth. For the analysis of the dynamics of output and employment, a new set of impulse-response exercises is considered.

Keywords: business cycles; impulse-response analysis; cointegration; regime shifts; Markov switching; labour hoarding (search for similar items in EconPapers)
JEL-codes: E32 E37 C32 E24 (search for similar items in EconPapers)
Date: 2001-01-01
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http://www.economics.ox.ac.uk/materials/working_papers/paper059.pdf (application/pdf)

Related works:
Working Paper: A NEW APPROACH TO THE ANALYSIS OF BUSINESS CYCLE TRANSITIONS IN A MODEL OF OUTPUT AND EMPLOYMENT (2001)
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