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A Disaggregated Markov‐Switching Model of the Business Cycle in UK Manufacturing

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  • Hans‐Martin Krolzig
  • Marianne Sensier

Abstract

Exploring index of production data for six major UK manufacturing sectors, we investigate the interaction of the UK business cycle with changes in the industrial structure of the UK economy during the last three decades. We propose a Markov‐switching vector equilibrium correction model with three regimes representing recession, normal growth and high growth. The regime shifts simultaneously affect the common growth rate and the sectoral equilibrium allocation of industrial production. In contrast to previous investigations, a common cycle can be uncovered which is closely related to traditional datings of the UK business cycle.

Suggested Citation

  • Hans‐Martin Krolzig & Marianne Sensier, 2000. "A Disaggregated Markov‐Switching Model of the Business Cycle in UK Manufacturing," Manchester School, University of Manchester, vol. 68(4), pages 442-460, June.
  • Handle: RePEc:bla:manchs:v:68:y:2000:i:4:p:442-460
    DOI: 10.1111/1467-9957.00204
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    Cited by:

    1. Terence C. Mills & Ping Wang, 2003. "Multivariate Markov Switching Common Factor Models for the UK," Bulletin of Economic Research, Wiley Blackwell, vol. 55(2), pages 177-193, April.
    2. Monica Billio & Laurent Ferrara & Dominique Guegan & Gian Luigi Mazzi, 2009. "Evaluation of Nonlinear time-series models for real-time business cycle analysis of the Euro area," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00423890, HAL.
    3. Krolzig, Hans-Martin, 2001. "Business cycle measurement in the presence of structural change: international evidence," International Journal of Forecasting, Elsevier, vol. 17(3), pages 349-368.

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