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Decomposing G7 Business Cycle

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Authors
Cho, Sungjin; Kim, Jangryoul
Issue Date
2011
Publisher
서울대학교 경제연구소
Citation
경제논집 Vol.50(2), pp. 121-136
Keywords
Business cyclesAsymmetryCo-movementPermanent and transitory components
Abstract
In this paper, we have estimated a model that incorporates two key features of business
cycles, co-movement among economic variables and switching between regimes of
expansion and recession, to aggregate quarterly data for the G7 countries. Two common
factors, interpreted as reflecting the permanent and transitory components of the business
cycle in the region, and estimates of turning points from one regime to the other were
extracted from the data by using the Kalman filter and maximum likelihood estimation
approach of Kim(1994). Estimation results confirm a fairly typical stylized fact of business
cycles - recessions are steeper and shorter than recoveries, and both co-movement and regime
switching are found to be important features of the business cycle in those countries as a
whole. The two common factors produce sensible representations of the trend and cycle, and
the estimated turning points agree quite well with independently determined chronologies.
It also turns out that the degree of synchronization between the G7 and the Korean economy
has significantly increased after the Asian currency crisis of 1997.
ISSN
1738-1150
Language
English
URI
http://hdl.handle.net/10371/75403
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)경제논집경제논집 vol.50 (2011)
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