IDEAS home Printed from https://ideas.repec.org/p/zbw/sfb649/sfb649dp2006-032.html
   My bibliography  Save this paper

When did the 2001 recession really start?

Author

Listed:
  • Polzehl, Jörg
  • Spokoiny, Vladimir
  • Stărică, Cătălin

Abstract

The paper develops a non-parametric, non-stationary framework for business-cycle dating based on an innovative statistical methodology known as Adaptive Weights Smoothing (AWS). The methodology is used both for the study of the individual macroeconomic time series relevant to the dating of the business cycle as well as for the estimation of their joint dynamic. Since the business cycle is defined as the common dynamic of some set of macroeconomic indicators, its estimation depends fundamentally on the group of series monitored. We apply our dating approach to two sets of US economic indicators including the monthly series of industrial production, nonfarm payroll employment, real income, wholesale-retail trade and gross domestic product (GDP). We find evidence of a change in the methodology of the NBER's Business-Cycle Dating Committee: an extended set of five monthly macroeconomic indicators replaced in the dating of the last recession the set of indicators emphasized by the NBER's Business- Cycle Dating Committee in recent decades. This change seems to seriously affect the continuity in the outcome of the dating of business cycle. Had the dating been done on the traditional set of indicators, the last recession would have lasted one year and a half longer. We find that, independent of the set of coincident indicators monitored, the last economic contraction began in November 2000, four months before the date of the NBER's Business-Cycle Dating Committee.

Suggested Citation

  • Polzehl, Jörg & Spokoiny, Vladimir & Stărică, Cătălin, 2006. "When did the 2001 recession really start?," SFB 649 Discussion Papers 2006-032, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    • Handle: RePEc:zbw:sfb649:sfb649dp2006-032
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/25115/1/512478317.PDF
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Erica L. Groshen & Simon M. Potter, 2003. "Has structural change contributed to a jobless recovery?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 9(Aug).
    2. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
    3. Boldin Michael D., 1996. "A Check on the Robustness of Hamilton's Markov Switching Model Approach to the Economic Analysis of the Business Cycle," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 1(1), pages 1-14, April.
    4. Cătălin Stărică & Clive Granger, 2005. "Nonstationarities in Stock Returns," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 503-522, August.
    5. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    6. Sichel, Daniel E, 1994. "Inventories and the Three Phases of the Business Cycle," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 269-277, July.
    7. Otrok, Christopher & Whiteman, Charles H, 1998. "Bayesian Leading Indicators: Measuring and Predicting Economic Conditions in Iowa," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 997-1014, November.
    8. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
    9. Chang-Jin Kim & Charles R. Nelson, 1998. "Business Cycle Turning Points, A New Coincident Index, And Tests Of Duration Dependence Based On A Dynamic Factor Model With Regime Switching," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 188-201, May.
    10. Stock, James H & Watson, Mark W, 1996. "Evidence on Structural Instability in Macroeconomic Time Series Relations," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(1), pages 11-30, January.
    11. Diebold, Francis X & Rudebusch, Glenn D, 1996. "Measuring Business Cycles: A Modern Perspective," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 67-77, February.
    12. James H. Stock & Mark W. Watson, 1989. "New Indexes of Coincident and Leading Economic Indicators," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 351-409, National Bureau of Economic Research, Inc.
    13. Lawrence J. Christiano & Terry J. Fitzgerald, 1998. "The business cycle: it's still a puzzle," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 22(Q IV), pages 56-83.
    14. Catalin Starica, 2004. "Is GARCH(1,1) as good a model as the Nobel prize accolades would imply?," Econometrics 0411015, University Library of Munich, Germany.
    15. James H. Stock & Mark W. Watson, 2003. "Has the business cycle changed?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 9-56.
    16. Harding, Don & Pagan, Adrian, 2001. "Extracting, Using and Analysing Cyclical Information," MPRA Paper 15, University Library of Munich, Germany.
    17. Chauvet, Marcelle, 1998. "An Econometric Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 969-996, November.
    18. James H. Stock & Mark W. Watson, 1993. "Business Cycles, Indicators, and Forecasting," NBER Books, National Bureau of Economic Research, Inc, number stoc93-1.
    19. Stock, James H. & Watson, Mark W. (ed.), 1993. "Business Cycles, Indicators, and Forecasting," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226774886.
    20. James H. Stock & Mark W. Watson, 1988. "A Probability Model of The Coincident Economic Indicators," NBER Working Papers 2772, National Bureau of Economic Research, Inc.
    21. James H. Stock & Mark W. Watson, 1993. "A Procedure for Predicting Recessions with Leading Indicators: Econometric Issues and Recent Experience," NBER Chapters, in: Business Cycles, Indicators, and Forecasting, pages 95-156, National Bureau of Economic Research, Inc.
    22. J. Polzehl & V. G. Spokoiny, 2000. "Adaptive weights smoothing with applications to image restoration," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 62(2), pages 335-354.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:hum:wpaper:sfb649dp2006-032 is not listed on IDEAS
    2. Michael Funke & Harm Bandholz, 2003. "In search of leading indicators of economic activity in Germany," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 22(4), pages 277-297.
    3. Catherine Doz & Peter Fuleky, 2019. "Dynamic Factor Models," Working Papers 2019-4, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    4. Stock, J.H. & Watson, M.W., 2016. "Dynamic Factor Models, Factor-Augmented Vector Autoregressions, and Structural Vector Autoregressions in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 415-525, Elsevier.
    5. Magnus Reif, 2020. "Macroeconomics, Nonlinearities, and the Business Cycle," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 87.
    6. Vincent, BODART & Konstantin, KHOLODILIN & Fati, SHADMAN-MEHTA, 2005. "Identifying and Forecasting the Turning Points of the Belgian Business Cycle with Regime-Switching and Logit Models," Discussion Papers (ECON - Département des Sciences Economiques) 2005006, Université catholique de Louvain, Département des Sciences Economiques.
    7. Grace Lee, 2011. "Aggregate shocks decomposition for eight East Asian countries," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 16(2), pages 215-232.
    8. Chauvet, Marcelle & Potter, Simon, 2013. "Forecasting Output," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 2, chapter 0, pages 141-194, Elsevier.
    9. van Os, Bram & van Dijk, Dick, 2024. "Accelerating peak dating in a dynamic factor Markov-switching model," International Journal of Forecasting, Elsevier, vol. 40(1), pages 313-323.
    10. Benoit Bellone, 2004. "Une lecture probabiliste du cycle d’affaires américain," Econometrics 0407002, University Library of Munich, Germany, revised 28 Mar 2005.
    11. Sonia de Lucas Santos & M. Jesús Delgado Rodríguez & Inmaculada Álvarez Ayuso & José Luis Cendejas Bueno, 2011. "Los ciclos económicos internacionales: antecedentes y revisión de la literatura," Cuadernos de Economía - Spanish Journal of Economics and Finance, Asociación Cuadernos de Economía, vol. 34(95), pages 73-84, Agosto.
    12. Diebold, Francis X & Rudebusch, Glenn D, 1996. "Measuring Business Cycles: A Modern Perspective," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 67-77, February.
    13. Issler, Joao Victor & Vahid, Farshid, 2006. "The missing link: using the NBER recession indicator to construct coincident and leading indices of economic activity," Journal of Econometrics, Elsevier, vol. 132(1), pages 281-303, May.
    14. Hamilton, James D., 2011. "Calling recessions in real time," International Journal of Forecasting, Elsevier, vol. 27(4), pages 1006-1026, October.
    15. Rodriguez Gabriel, 2007. "Application of Three Alternative Approaches to Identify Business Cycles in Peru," Working Papers 2007-007, Banco Central de Reserva del Perú.
    16. E. Andersson & D. Bock & M. Frisen, 2006. "Some statistical aspects of methods for detection of turning points in business cycles," Journal of Applied Statistics, Taylor & Francis Journals, vol. 33(3), pages 257-278.
    17. Issler, Joao Victor & Vahid, Farshid, 2006. "The missing link: using the NBER recession indicator to construct coincident and leading indices of economic activity," Journal of Econometrics, Elsevier, vol. 132(1), pages 281-303, May.
    18. Benoît Bellone, 2006. "Une lecture probabiliste du cycle d’affaires américain," Économie et Prévision, Programme National Persée, vol. 172(1), pages 63-81.
    19. Michael T. Owyang & Jeremy Piger & Howard J. Wall, 2005. "Business Cycle Phases in U.S. States," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 604-616, November.
    20. Carriero, Andrea & Marcellino, Massimiliano, 2007. "A comparison of methods for the construction of composite coincident and leading indexes for the UK," International Journal of Forecasting, Elsevier, vol. 23(2), pages 219-236.
    21. Shyh-Wei Chen, 2006. "Enhanced reliability of the leading indicator in identifying turning points in Taiwan? an evaluation," Economics Bulletin, AccessEcon, vol. 5(10), pages 1-17.

    More about this item

    Keywords

    business cycle; non-parametric smoothing; non-stationarity;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:sfb649:sfb649dp2006-032. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/sohubde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.