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

Research output: Contribution to journalArticle

478 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)608-616
Number of pages9
JournalReview of Economics and Statistics
Volume81
Issue number4
Publication statusPublished - 1999 Nov 1

ASJC Scopus subject areas

  • Economics and Econometrics
  • Social Sciences (miscellaneous)

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