Structural Breaks in U.S. Macroeconomic Time Series: A Bayesian Model Averaging Approach

Check, Adam; Piger, Jeremy M.

doi:10.2139/ssrn.3284018

Cited by 5 publications

(4 citation statements)

References 52 publications

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“…28 We note that the inherent uncertainty of whether, and if so when, a break in the drift in U.S. real GDP has occurred is not entirely surprising given the mixed evidence on the issue (see, e.g. Check and Piger, 2018). We allowed for a break in the drift of U.S. GDP in 2006Q2, and present these results in Section E of the online appendix, but note that our main results are robust.…”

Section: Shifts In Meanmentioning

confidence: 73%

A unified approach for jointly estimating the business and financial cycle, and the role of financial factors

Berger

Richter

Wong

2022

Journal of Economic Dynamics and Control

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We jointly estimate the U.S. business and financial cycle through a unified empirical approach while simultaneously accounting for the role of financial factors. Our approach uses the Beveridge-Nelson decomposition within a medium-scale Bayesian Vector Autoregression. First, we show, both in reduced form and when we identify a structural financial shock, that variation in financial factors had a larger role post-2000 and a more modest role pre-2000. Our results suggest that the financial sector did play a role in overheating the business cycle pre-Great Recession. Second, while we document a positive unconditional correlation between the credit cycle and the output gap, the correlation of the lagged credit cycle and the contemporaneous output gap turns negative when we condition on a financial shock. The sign-switch suggests that the nature of the underlying shocks may be important for understanding the relationship between the business and financial cycles.

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Section: Shifts In Meanmentioning

confidence: 73%

A unified approach for jointly estimating the business and financial cycle, and the role of financial factors

Berger

Richter

Wong

2022

Journal of Economic Dynamics and Control

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“…Following Jebabli et al (2014), we employ the conventional ADF unit root testing approach to validate the stationarity of our variables. However, the conventional ADF test may be underpowered, given that the macroeconomic indicators may have multiple potential structural breaks (Check & Piger, 2021). Therefore, similar to Nasir (2021), we further apply the GLS-based ADF test proposed by Carrion-i-Silvestre et al (2009), which allows for multiple structural breaks in both the null and alternative hypotheses.…”

Section: Resultsmentioning

confidence: 99%

Economic Uncertainty and Exchange Market Pressure: Evidence From China

Lin

2022

Sage Open

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This paper evaluates the impact of local and external economic uncertainty shocks on China’s exchange market pressure from a time-varying perspective. We first construct a simple behavioral model to provide some economic background for our empirical analysis. The model identifies two channels, namely market sentiment and market demand, through which economic uncertainty has a time-varying impact on exchange market pressure. Notably, we calculate a new exchange market pressure index for China by considering China’s practice. Using the economic policy uncertainty index as a proxy for economic uncertainty and our new estimates of China’s exchange market pressure, we employ a novel TVP-VAR model controlling for over-parameterization to a monthly dataset from January 2001 to October 2020 to analyze the impact of China’s and U.S. economic policy uncertainties on China’s exchange market pressure. Our empirical findings robustly show that an upsurge in U.S. EPU is followed by appreciation pressure of the RMB against the dollar, while a hike in China’s EPU triggers devaluation pressure on the RMB. In addition, the impact of economic policy uncertainty has considerable time variation in magnitude, especially after mid-2011, showing a trade-off mechanism between the effects of domestic and foreign economic uncertainties on China’s exchange market pressure. Moreover, we attribute the time-varying features to the changes in China’s dependence on the U.S. and in the exchange rate flexibility. Finally, China should further improve the exchange rate flexibility, reduce its dependence on the U.S. and develop a more diversified currency basket in the exchange rate formation mechanism. JEL: F31 C50 E70

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“…17 We note that the inherent uncertainty of whether, and if so when, a break in the drift in U.S. real GDP has occurred is not entirely surprising given the mixed evidence on the issue (see, e.g. Check and Piger, 2018). We therefore allowed for a break in the drift of real GDP in 2006Q2 to explore the robustness of our results.…”

Section: Growthmentioning

confidence: 96%

Financial Factors and the Business Cycle

2020

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We study how financial factors shape and interact with the U.S. business cycle through a unified empirical approach where we jointly estimate financial and business cycles as well as identify their underlying drivers using a medium-scale Bayesian Vector Autoregression. First, we show, both in reduced form and when we identify a structural financial shock, that variation in financial factors had a larger role in driving the output gap post-2000 and a more modest role pre-2000. Our results suggest that the financial sector did play a role in overheating the business cycle pre-Great Recession. Second, while we document a positive unconditional correlation between the credit cycle and the output gap, the correlation of the lagged credit cycle and the contemporaneous output gap turns negative when we condition on a financial shock. The sign-switch suggests that the nature of the underlying shocks may be important for understanding the relationship between the business and financial cycles.

show abstract

Structural Breaks in U.S. Macroeconomic Time Series: A Bayesian Model Averaging Approach

Cited by 5 publications

References 52 publications

A unified approach for jointly estimating the business and financial cycle, and the role of financial factors

A unified approach for jointly estimating the business and financial cycle, and the role of financial factors

Economic Uncertainty and Exchange Market Pressure: Evidence From China

Financial Factors and the Business Cycle

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