DP8866 Markov-switching dynamic factor models in real time

Author(s): Maximo Camacho, Gabriel Pérez-Quirós, Pilar Poncela
Publication Date: February 2012
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=8866

We extend the Markov-switching dynamic factor model to account for some of the specificities of the day-to-day monitoring of economic developments from macroeconomic indicators, such as ragged edges and mixed frequencies. We examine the theoretical benefits of this extension and corroborate the results through several MonteCarlo simulations. Finally, we assess its empirical reliability to compute real-time inferences of the US business cycle.