The Role of Oscillatory Modes in U.S. Business Cycles
26 Pages Posted: 5 Jun 2012
Date Written: June 5, 2012
We apply the advanced time-and-frequency-domain method of singular spectrum analysis to study business cycle dynamics in a set of nine U.S. macroeconomic indicators. This method provides a robust way to identify and reconstruct shared oscillations, whether intermittent or modulated. We address the problem of spurious cycles generated by the use of detrending filters and present a Monte Carlo test to extract significant oscillations. Finally, we demonstrate that the behavior of the U.S. economy changes significantly between episodes of growth and recession; these variations cannot be generated by random shocks alone, in the absence of endogenous variability.
Keywords: advanced spectral methods, comovements, frequency domain, Monte Carlo testing, time domain
JEL Classification: C15, C60, E32
Suggested Citation: Suggested Citation