Has the U.S. Economy Become More Stable? A Bayesian Approach Based on a Markov-Switching Model of the Business Cycle
- 1 November 1999
- journal article
- Published by MIT Press in The Review of Economics and Statistics
- Vol. 81 (4) , 608-616
- https://doi.org/10.1162/003465399558472
Abstract
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. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of TechnologyKeywords
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