Econometrica Vol. 57 No. 2 1989
A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle
Abstract
This paper models occasional, discrete shifts in the growth rate of a nonstationary series. Algorithms for inferring these unobserved shifts are presented, a byproduct of which permits estimation of parameters by maximum likelihood. An empirical application of this technique suggests that the periodic shift from a positive growth rate to a negative growth rate is a recurrent feature of the U.S. business cycle, and indeed could be used as an objective criterion for defining and measuring economic recessions. The estimated parameter values suggest that a typical economic recession is associated with a 3 percent permanent drop in the level of GNP.
- DOI
- 10.2307/1912559
- Volume
- 57
- Issue
- 2
- Pages
- 357
- Sources
- bibtex:phds-export.bib crossref openalex