## Has the U.S. Economy Become More Stable? A Bayesian Approach Based on a Markov-Switching Model of Business Cycle (1999)

Citations: | 255 - 13 self |

### BibTeX

@MISC{Kim99hasthe,

author = {Chang-Jin Kim and Charles R. Nelson},

title = {Has the U.S. Economy Become More Stable? A Bayesian Approach Based on a Markov-Switching Model of Business Cycle},

year = {1999}

}

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### Abstract

We hope to be able to provide answers to the following questions: 1) Has there been a structural break in postwar U.S. real GDP growth toward more stabilization? 2) If so, when would it have been? 3) What's the nature of the structural break? For this purpose, we employ a Bayesian approach to dealing with structural break at an unknown changepoint in a Markov-switching model of business cycle. Empirical results suggest that there has been a structural break in U.S. real GDP growth toward more stabilization, with the posterior mode of the break date around 1984:1. Furthermore, we #nd a narrowing gap between growth rates during recessions and booms is at least as important as a decline in the volatility of shocks. Key Words: Bayes Factor, Gibbs sampling, Marginal Likelihood, Markov-Switching, Stabilization, Structural Break. JEL Classi#cations: C11, C12, C22, E32. 1. Introduction In the literature, the issue of postwar stabilization of the U.S. economy relative to the prewar period has...