The Measurement of Revision Effects on Business Cycle Turning Points.

Posted: 22 Oct 2019

See all articles by Firmin Vlavonou

Firmin Vlavonou

affiliation not provided to SSRN

Stephen Gordon

Universite Laval

Date Written: October 11, 2017

Abstract

This paper examines the effects of revisions on quarterly GDP estimates in highlighting effects on business cycle turning points. We integrate a Markow-switching process to a dynamic factor model of monthly GDP. The quarterly averages of our monthly GDP estimates are, by construction, exactly equal to quarterly GDP estimates.

This study finds that the model used in incorporating the preliminary data is a flexible framework in estimating of the 'true' quarterly GDP. Data precision estimates are improved when the revision errors get smaller and unimproved on the other hand. When the model is estimated using data available immediately after 2001, it identifies a recession in 2001-02. But as revised data are added to the information set, the model assigns progressively lower probabilities to the recession state in 2001-02.

Keywords: Revision effects and turning points,'True' GDP estimates, Preliminary GDP, Dynamic factor model, exact constraint

JEL Classification: C01, C11, C13, C15

Suggested Citation

Vlavonou, Firmin and Gordon, Stephen, The Measurement of Revision Effects on Business Cycle Turning Points. (October 11, 2017). Available at SSRN: https://ssrn.com/abstract=3468407

Firmin Vlavonou

affiliation not provided to SSRN

Stephen Gordon (Contact Author)

Universite Laval ( email )

Departement d'economique
Ste-Foy, Quebec G1K 7P4
Canada
(418) 656-2416 (Phone)
(418) 656-7798 (Fax)

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