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Simultaneously modeling the volatility of the growth rate of real GDP and determining business cycle turning points: Evidence from the U.S., Canada and the UK

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  • Chen, Shyh-Wei

Abstract

This paper investigates the volatility of the rates of output growth for the U.S., Canada and the UK. We empirically characterize the volatility of the growth rate of real GDP and, at the same time, we hope we can successfully identify business cycle turning points. The empirical results show that there have been structural changes in the volatility of output growth for these countries. While the Markov Switching heteroscedasticity model can capture this feature very well for all three countries, the modified Markov Switching heteroscedasticity model introduced here not only performs extremely well in modeling the volatility behavior of the growth rate of real GDP, but, at the same time, it also successfully identifies business cycle peak and trough dates.

Suggested Citation

  • Chen, Shyh-Wei, 2006. "Simultaneously modeling the volatility of the growth rate of real GDP and determining business cycle turning points: Evidence from the U.S., Canada and the UK," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 71(2), pages 87-102.
    • Handle: RePEc:eee:matcom:v:71:y:2006:i:2:p:87-102
    DOI: 10.1016/j.matcom.2005.11.015
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    Cited by:

    1. P. Fulya Gebeşoğlu & Hasan Murat Ertuğrul, 2014. "GDP Volatility Spillovers from the US and EU to Turkey: A Dynamic Investigation," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 3(2), pages 51-66, May.
    2. Fukuda, Kosei, 2009. "Distribution switching in financial time series," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 79(5), pages 1711-1720.
    3. Gilbert Mbara, 2017. "Business Cycle Dating after the Great Moderation: A Consistent Two – Stage Maximum Likelihood Method," Working Papers 2017-13, Faculty of Economic Sciences, University of Warsaw.

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    More about this item

    Keywords

    Business cycle; Volatility; Markov Switching model;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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