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Title:Stock prices and economic fluctuations: a Markov switching structural vector autoregressive analysis PDF Logo
Authors:Lanne, Markku
Luetkepohl, Helmut
Issue Date:2008
Series/Report no.:CESifo working paper 2407
Abstract:The role of expectations for economic fluctuations has received considerable attention in recent business cycle analysis. We exploit Markov regime switching models to identify shocks in cointegrated structural vector autoregressions and investigate different identification schemes for bi-variate systems comprising U.S. stock prices and total factor productivity. The former variable is viewed as reflecting expectations of economic agents about future productivity. It is found that some previously used identification schemes can be rejected in our model setup. The results crucially depend on the measure used for total factor productivity.
Subjects:Cointegration
Markov regime switching model
vector error correction model
structural vector autoregression
mixed normal distribution
JEL:C32
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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