A Stochastic Frontier Approach to the Plucking Business Cycle Model with Structural Changes in Cyclicality
Date Issued
2015
Date
2015
Author(s)
Yen, Cheng-Yang
Abstract
The globalization of markets and the increasing complexity of financial products, the magnitude of fluctuations in the economy cycle has become more difficult to predict, so this thesis will focus on the short-term cycle. In this thesis, we used the stochastic frontier model to estimate Friedman (1964) plucking model, and further analyzed break points of business cycle. We use the US quarterly data from 1955:Q1 to 2014:Q3 as the empirical sample, and also considered the effect of variables leading business index, the federal funds rate, and the government financial policy. Our results show that with different data variables set, the most likely break points there in 1969, 1973, 1984, 2003, 2006 and 2008. In particular, 1973, 1984 and 2006 are same with the literature break points in the trend, so we found break points in the trend and cycle are closely related to,the change of economic structure not only affects the long-term trend of development, but also affect the state of the short-term cycle. In addition, the break point 2008 also showed the impact on the economy during serious financial crisis.
Subjects
Plucking Model
Stochastic Frontier Model
Structural Change
Type
thesis
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