DP4975 Jump-and-Rest Effects of US Business Cycles

Author(s): Maximo Camacho, Gabriel Pérez-Quirós
Publication Date: March 2005
Keyword(s): business cycles, output growth, time series
JEL(s): C22, E27, E32
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4975

One of the most extended empirical stylized facts about output dynamics in the United States is the positive autocorrelation of output growth. This paper shows that the positive autocorrelation can be better captured by shifts between business cycle states rather than by the standard view of autoregressive coefficients. This result is extremely robust to different non-linear alternative models and also applies not only to output, but also to the most relevant macroeconomic variables.