The role of oscillatory modes in US business cycles

Groth, Andreas; Ghil, Michael; Hallegatte, Stéphane; Dumas, Patrice

doi:10.1787/jbcma-2015-5jrs0lv715wl

Cited by 13 publications

(11 citation statements)

References 42 publications

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“…Note that oscillatory modes of similar periodicity have already been identified in previous M-SSA analyses of the US business cycle 35 and of a subset of European countries. 36 These studies, however, relied on a prior detrending of the raw data, which is subject to the criticism of business cycles being merely a spurious by-product of the detrending procedure.…”

Section: A Complementary M-ssa Analysissupporting

confidence: 72%

“…In the US GDP, the RCs 5-6 are characterized by a fairly constant amplitude throughout the whole observation interval. Groth et al 35 have already shown that an oscillatory mode of similar period plays an important role during US recessions, when the trajectory of the dataset stays closer to a suspected limit cycle, like the one in the non-equilibrium dynamic model (NEDyM) of Hallegatte et al 66 or in other endogenous business cycle models. 27 The remarkably persistent character of RCs 5-6 in the US economy is in contrast to a more transient behavior in several of the European countries in Fig.…”

Section: A Complementary M-ssa Analysismentioning

confidence: 83%

“…69 For this reason, the dataset is often detrended first, prior to any spectral analysis. 35,36 In the present analysis, though, a careful varimax rotation of the M-SSA EOFs helps reduce mixture effects and improves the separation of nearby frequencies. 59 Figure 8 shows the residuals after subtracting the trend component given by RCs 1-2 from the raw data.…”

Section: A Complementary M-ssa Analysismentioning

confidence: 95%

“…Univariate singular spectrum analysis has already been applied to study business cycles of individual macroeconomic indicators in a single country, 33,34 while a first application of M-SSA across indicators has been shown to give deeper insights into the dynamical properties of US business cycles. 35 Only quite recently, though, has business cycle synchronization been studied in a joint M-SSA analysis of a small set of three European economies and the US. 36 In the latter study, common cyclical characteristics have been identified, both across countries and across indicators.…”

Section: Economic Backgroundmentioning

confidence: 99%

“…74 Objective significance tests, though, have demonstrated that these modes cannot be generated by random shocks alone. 35,36 The consistency in oscillation period between M-SSA analyses of detrended data and raw data is an even stronger indicator for the existence of shared, universal properties of the underlying dynamics. Moreover, multi-annual cyclic behavior, such as the Juglar 1 7-11-yr cycles and the 3-4-yr Kitchin 2 cycles, has been discussed at some length before.…”

Section: A Complementary M-ssa Analysismentioning

confidence: 99%

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Synchronization of world economic activity

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Common dynamical properties of business cycle fluctuations are studied in a sample of more than 100 countries that represent economic regions from all around the world. We apply the methodology of multivariate singular spectrum analysis (M-SSA) to identify oscillatory modes and to detect whether these modes are shared by clusters of phase- and frequency-locked oscillators. An extension of the M-SSA approach is introduced to help analyze structural changes in the cluster configuration of synchronization. With this novel technique, we are able to identify a common mode of business cycle activity across our sample, and thus point to the existence of a world business cycle. Superimposed on this mode, we further identify several major events that have markedly influenced the landscape of world economic activity in the postwar era.

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Section: A Complementary M-ssa Analysissupporting

confidence: 72%

Section: A Complementary M-ssa Analysismentioning

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Section: A Complementary M-ssa Analysismentioning

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Section: A Complementary M-ssa Analysismentioning

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Synchronization of world economic activity

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Impacts of Natural Disasters on a Dynamic Economy

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This paper presents a modeling framework for macroeconomic growth dynamics; it is motivated by recent attempts to formulate and study "integrated models" of the coupling between natural and socioeconomic phenomena. The challenge is to describe the interfaces between human activities and the functioning of the earth system. We examine the way that this interface works in the presence of endogenous business cycle dynamics, based on a non-equilibrium dynamic model. Recent findings about the macroeconomic response to natural disasters in such a nonequilibrium setting have shown a more severe response to natural disasters during expansions than during recessions. These findings raise questions about the assessment of climate change damages or natural disaster losses that are based purely on long-term growth models. In order to compare the theoretical findings with observational data, we analyze cyclic behavior in the U.S. economy, based on multivariate singular spectrum analysis. We analyze a total of nine aggregate indicators in a 52-year interval (1954-2005) and demonstrate that the behavior of the U.S. economy changes significantly between intervals of growth and recession, with higher volatility during expansions.

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A state‐dependent linear recurrent formula with application to time series with structural breaks

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An underlying assumption in Multivariate Singular Spectrum Analysis (MSSA) is that the time series are governed by a linear recurrent continuation. However, in the presence of a structural break, multiple series can be transferred from one homogeneous state to another over a comparatively short time breaking this assumption. As a consequence, forecasting performance can degrade significantly. In this paper, we propose a state-dependent model to incorporate the movement of states in the linear recurrent formula called a State-Dependent Multivariate SSA (SD-MSSA) model. The proposed model is examined for its reliability in the presence of a structural break by conducting an empirical analysis covering both synthetic and real data. Comparison with standard MSSA, BVAR, VAR and VECM models shows the proposed model outperforms all three models significantly.

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The role of oscillatory modes in US business cycles

Cited by 13 publications

References 42 publications

Synchronization of world economic activity

Synchronization of world economic activity

Impacts of Natural Disasters on a Dynamic Economy

A state‐dependent linear recurrent formula with application to time series with structural breaks

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