The Brazilian Business Cycle and Growth Cycle
UC Riverside Economics Working Paper No. 2000
35 Pages Posted: 19 Dec 2000
Date Written: July 2001
This paper uses several procedures to date and analyze the Brazilian business cycle and growth cycle. In particular, a Markov switching model is fitted to quarterly and annual real production data. The smoothed probabilities of the Markov states are used as predictive rules to define different phases of cyclical fluctuations of real Brazilian production. The results are compared with different non-parametric rules. All methods implemented yield similar dating and reveal asymmetries across the different states of the Brazilian business and growth cycle, in which slowdowns and recessions are short and abrupt, while high growth phases and expansions are longer and less steep. The resulting dating of the Brazilian economic cycles can be used as a reference point for construction and evaluation of the predictive performance of coincident, leading, or lagging indicators of economic activity. In addition, the filtered probabilities obtained from the Markov switching model allow early recognition of the transition to a new business cycle phase, which can be used, for example, for evaluation of the adequate strength and timing of counter-cyclical policies, for reassessment of projected sales or profits by businesses and investors, or for monitoring of inflation pressures.
Keywords: Business Cycle, Growth Cycle, Markov Switching, Non-Parametric Rules
JEL Classification: C32, C50, E32
Suggested Citation: Suggested Citation