A Comparison of the Real-Time Performance of Business Cycle Dating Methods

By Marcelle Chauvet, Jeremy Piger. 2005

339 citations recorded by the source corpus.

We evaluate the ability of formal rules to establish U.S. business cycle turning point dates in real time. We consider two approaches, a nonparametric algorithm and a parametric Markov-switching dynamic-factor model. Using a new “real-time” dataset of coincident monthly variables, we find that both approaches would have accurately identified the NBER business cycle chronology had they been in use over the past 30 years, with the Markov-switching model most closely matching the NBER dates. Further, both approaches, and particularly the Markov-switching model, yielded significant improvement over the NBER in the speed with which business cycle troughs were identified.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/82b9901e89081e2d54a6ca4e40930e3e4ce27a5a

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Citations in the corpus

Dating Business Cycle Turning Points (2005, methodology): “…of step t − 1 of these calculations, we would have calculated the following three magnitudes: Pr(St−1 = i|Yt−1) (33) f (i) t−1|t−1 (34) 14 For example, Chauvet and Piger (2005) estimate the dynamic factor model with regime switching in real time using both Kim’s algorithm and Bayesian…”
Dating systemic financial stress episodes in the EU countries (2017, methodology): “Chauvet and Piger (2008) show that the latter method improves over the NBER methodology in the speed at which business cycle troughs are identified.”
EXTRACTING NONLINEAR SIGNALS FROM SEVERAL ECONOMIC INDICATORS (2012, neutral): “V = PN i=1 (2)i (2)i (1 (2)) + r PN i=1 (2)i (2)i (1 (2)) 2 + 4 PN i=1 (2)i (2)i 2 PN i=1 (2)i (2)i ; (10)”
Estimating the Real Effects of Uncertainty Shocks at the Zero Lower Bound (2017, neutral): “Chauvet (1998) and Chauvet and Piger (2008) obtain smoothed recession probabilities for the United States from a Dynamic-Factor MarkovSwitching model applied to coincident business cycle indicators such as non-farm payroll employment, industrial production, real personal income excluding transfer…”
Evaluating the Classification of Economic Activity into Recessions and Expansions (2011, background): “Chauvet-Hamilton Index 1967:11 - 2009:2 Chauvet and Hamilton (2005) Chauvet-Piger Index 1967:2 - 2009:9 Chauvet and Piger (2008) Aruba Diebold Scotti Index 1960:2 - 2009:10 Federal Reserve Bank of Philadelphia Chicago Fed National Activity In- dex 1967:3 - 2009:10 Federal Reserve Bank of…”
Markov-switching dynamic factor models in real time (2018, background): “Notice that minus the rst integral represents the entropy of the density f(y2;tjst = 1; y1;t) and that Z f(y2;tjst = 1; y1;t) ln f(y2;tjst = 1; y1;t) f(y2;tjst = 0; y1;t) dy2;t (12)”