A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle
@article{Hamilton1989ANA, title={A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle}, author={James D. Hamilton}, journal={Econometrica}, year={1989}, volume={57}, pages={357-384} }
This paper models occasional, discrete shifts in the growth rate of a nonstationary series. Algorithms for inferring these unobserved shifts are presented, a byproduct of which permits estimation of parameters by maximum likelihood. An empirical application of this technique suggests that the periodic shift from a positive growth rate to a negative growth rate is a recurrent feature of the U.S. business cycle, and indeed could be used as an objective criterion for defining and measuring…
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