Markov-Switching Dynamic Factor Models in Real Time
55 Pages Posted: 12 Feb 2012
Date Written: February 10, 2012
We extend the Markov-switching dynamic factor model to account for some of the specifi cities of the day-to-day monitoring of economic developments from macroeconomic indicators, such as ragged edges and mixed frequencies. We examine the theoretical benefi ts of this extension and corroborate the results through several Monte Carlo simulations. Finally, we assess its empirical reliability to compute real-time inferences of the US business cycle.
Keywords: business cycles, output growth, time series
JEL Classification: E32, C22, E27
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