Has the U.S. Economy Become More Stable? A Bayesian Approach Based on a Markov-Switching Model of the Business Cycle

Chang‐Jin Kim; Charles R. Nelson

doi:10.1162/003465399558472

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Has the U.S. Economy Become More Stable? A Bayesian Approach Based on a Markov-Switching Model of the Business Cycle

Chang‐Jin Kim^1,2; Charles R. Nelson³

¹ Korea University · ² Department of Economics · ³ University of Washington

The Review of Economics and Statistics 1999

We hope to answer three questions: Has there been a structural break in postwar U.S. real GDP growth towards stabilization? If so, when? What is the nature of this structural break?We employ a Bayesian approach to identify a structural break at an unknown changepoint in a Markov-switching model of the business cycle. Empirical results suggest a break in GDP growth toward stabilization, with the posterior mode of the break date at 1984:1. Furthermore, we find a narrowing gap between growth rates during recessions and booms that is at least as important as any decline in the volatility of shocks.

DOI: 10.1162/003465399558472
Volume: 81 (4)
Pages: 608-616
Language: en
Export: BibTeX
Sources: crossref openalex