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Measuring U.S. business cycles: A comparison of two methods and two indicators of economic activities

Author

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  • Ahking, Francis W.

    (The University of Connecticut)

Abstract

We examine two issues in business cycle research. We first compare the performance of Hamilton's Markov-Switching (MS) model and the Bry and Boschan algorithm in replicating the US business cycle features. A number of studies, especially Harding and Pagan, have demonstrated that Hamilton's nonlinear MS model do not replicate business cycle features better than simpler linear models. Second, we compare the ability of the U.S. real GDP and a relatively new coincident index of four economic indicators, published by the Federal Reserve Bank of Philadelphia, in replicating features of the U.S. business cycle. We find that Hamilton's MS model is not robust when compared to the Bry and Boschan algorithm with respect to different sample periods and to different measures of real income. Second, we also find that a constructed quarterly version of the coincident index is slightly preferred over the real GDP.

Suggested Citation

  • Ahking, Francis W., 2014. "Measuring U.S. business cycles: A comparison of two methods and two indicators of economic activities," Journal of Economic and Social Measurement, IOS Press, issue 4, pages 199-216.
    • Handle: RePEc:ris:iosjes:0020
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    References listed on IDEAS

    as
    1. Harding, Don & Pagan, Adrian, 2003. "Rejoinder to James Hamilton," Journal of Economic Dynamics and Control, Elsevier, vol. 27(9), pages 1695-1698, July.
    2. Beate Schirwitz, 2009. "A comprehensive German business cycle chronology," Empirical Economics, Springer, vol. 37(2), pages 287-301, October.
    3. Harding, Don & Pagan, Adrian, 2003. "A comparison of two business cycle dating methods," Journal of Economic Dynamics and Control, Elsevier, vol. 27(9), pages 1681-1690, July.
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    More about this item

    Keywords

    Markov-switching model; Bry and Boschan algorithm; business cycle dating;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values

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