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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