Business Cycles Across Space and Time

44 Pages Posted: 14 May 2021

See all articles by Neville Francis

Neville Francis

University of North Carolina (UNC) at Chapel Hill

Michael Owyang

Federal Reserve Bank of St. Louis - Research Division

Daniel Soques

University of North Carolina (UNC) at Wilmington

Date Written: January, 2019

Abstract

We study the comovement of international business cycles in a time series clustering model with regime-switching. We extend the framework of Hamilton and Owyang (2012) to include time-varying transition probabilities to determine what drives similarities in business cycle turning points. We find four groups, or "clusters", of countries which experience idiosyncratic recessions relative to the global cycle. Additionally, we find the primary indicators of international recessions to be fluctuations in equity markets and geopolitical uncertainty. In out-of-sample forecasting exercises, we find that our model is an improvement over standard benchmark models for forecasting both aggregate output growth and country-level recessions.

JEL Classification: C11, C32, E32, F44

Suggested Citation

Francis, Neville and Owyang, Michael T. and Soques, Daniel, Business Cycles Across Space and Time (January, 2019). FRB St. Louis Working Paper No. 2019-010, Available at SSRN: https://ssrn.com/abstract=3843858 or http://dx.doi.org/10.20955/wp.2019.010

Neville Francis (Contact Author)

University of North Carolina (UNC) at Chapel Hill ( email )

102 Ridge Road
Chapel Hill, NC NC 27514
United States

Michael T. Owyang

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States

Daniel Soques

University of North Carolina (UNC) at Wilmington ( email )

601 South College Road
Wilmington, NC 28403
United States

HOME PAGE: http://people.uncw.edu/soquesd/index.html

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