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A model-based ranking of U.S. recessions

Author

Listed:
  • Ivan Jeliazkov

    (UC Irvine)

  • Rui Liu

    (UC Irvine)

Abstract

A dynamic factor VAR model, estimated by MCMC simulation, is employed to assess the relative severity of post-war U.S. recessions. Joint modeling and estimation of all model unknowns yields rank estimates that fully account for parameter uncertainty. A convenient by-product of the simulation approach is a probability distribution of possible recession ranks that (i) accommodates uncertainty about the exact location of troughs, and (ii) can be used to resolve any potential inconsistencies or ties in the rank estimates. These features distinguish the approach from single-variable measures of downturns that ignore the co-movement and dynamic dependence and could lead to contradictory conclusions about timing and relative severity.

Suggested Citation

  • Ivan Jeliazkov & Rui Liu, 2010. "A model-based ranking of U.S. recessions," Economics Bulletin, AccessEcon, vol. 30(3), pages 2289-2296.
    • Handle: RePEc:ebl:ecbull:eb-10-00483
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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I3-P210.pdf
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    Citations

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    Cited by:

    1. Joshua C. C. Chan & Eric Eisenstat, 2015. "Marginal Likelihood Estimation with the Cross-Entropy Method," Econometric Reviews, Taylor & Francis Journals, vol. 34(3), pages 256-285, March.
    2. Joshua C C Chan & Cody Y L Hsiao, 2013. "Estimation of Stochastic Volatility Models with Heavy Tails and Serial Dependence," CAMA Working Papers 2013-74, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    3. Paul Viefers, 2011. "Bayesian Inference for the Mixed-Frequency VAR Model," Discussion Papers of DIW Berlin 1172, DIW Berlin, German Institute for Economic Research.

    More about this item

    Keywords

    Bayesian estimation; business cycle; dynamic factor; Markov chain Monte Carlo (MCMC); vector autoregressive (VAR) model;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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