Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/87570 
Year of Publication: 
2011
Series/Report no.: 
Tinbergen Institute Discussion Paper No. 11-154/4
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
This paper conducts an empirical analysis of the heterogeneity of recessions inmonthly U.S. coincident and leading indicator variables. Univariate Markovswitchingmodels indicate that it is appropriate to allow for two distinct recessionregimes, corresponding with ‘mild’ and ‘severe’ recessions. All downturnsstart with a mild decline in the level of economic activity. Contractions thatdevelop into severe recessions mostly correspond with periods of substantialcredit squeezes as suggested by the ‘financial accelerator’ theory. MultivariateMarkov-switching models that allow for phase shifts between the cyclicalregimes of industrial production and the Conference Board Leading EconomicIndex confirm these findings.
Subjects: 
Business cycle
phase shifts
regime-switching models
Bayesian analysis
JEL: 
C11
C32
C51
C52
E32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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