Title

Measuring and Comparing Business-Cycle Features

Document Type

Article

Department

Economics (CMC)

Publication Date

1997

Abstract

Since the extensive work by Burns and Mitchell, many economists have interpreted economic fluctuations in terms of business-cycle phases. Given this, we argue that, in addition to usual model-selection criteria currently used in the profession, the adequacy of a univariate macroeconomic time series model should be based on its ability to replicate two important business-cycle features of the U.S. data—duration and amplitude. We propose several checks for whether univariate statistical models generate business-cycle features observed in U.S. gross domestic product (GDP) and find that many popular nonlinear models for the log of real GDP are no better at replicating the duration and amplitude features of the data than a simple ARIMA(1, 1, 0).

Rights Information

© 1997 Taylor and Francis

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