Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108590
Authors: 
Çakmaklı, Cem
Paap, Richard
van Dijk, Dick
Year of Publication: 
2012
Series/Report no.: 
Koç University-TÜSİAD Economic Research Forum Working Paper Series 1206
Abstract: 
This paper conducts an empirical analysis of the heterogeneity of recessions in monthly U.S. coincident and leading indicator variables. Univariate Markovswitching models indicate that it is appropriate to allow for two distinct recession regimes, corresponding with 'mild' and 'severe' recessions. All downturns start with a mild decline in the level of economic activity. Contractions that develop into severe recessions mostly correspond with periods of substantial credit squeezes as suggested by the 'financial accelerator' theory. Multivariate Markov-switching models that allow for phase shifts between the cyclical regimes of industrial production and the Conference Board Leading Economic Index confirm these findings.
Subjects: 
Business cycle
phase shifts
regime-switching models
Bayesian analysis
JEL: 
C11
C32
C51
C52
E32
Document Type: 
Working Paper

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