Working Paper: CEPR ID: DP4975
Authors: Maximo Camacho; Gabriel Pérez Quiros
Abstract: One of the most extended empirical stylized facts about output dynamics in the United States is the positive autocorrelation of output growth. This paper shows that the positive autocorrelation can be better captured by shifts between business cycle states rather than by the standard view of autoregressive coefficients. This result is extremely robust to different non-linear alternative models and also applies not only to output, but also to the most relevant macroeconomic variables.
Keywords: Business Cycles; Output Growth; Time Series
JEL Codes: C22; E27; E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| business cycle phases (E32) | output growth dynamics (O40) |
| absence of autocorrelation in output growth (O40) | business cycle shifts (E32) |
| large shocks (E32) | sharp transitions between growth regimes (O41) |
| small shocks (E32) | fluctuations around each growth state (E32) |
| business cycle states (E32) | output growth dynamics (O40) |
| jump-and-rest effect of business cycles (E32) | output growth dynamics (O40) |