The Propagation of Industrial Business Cycles

42 Pages Posted: 18 Nov 2015

See all articles by Maximo Camacho

Maximo Camacho

Autonomous University of Barcelona - Department of Economics; Universidad de Murcia - Departamento de Metodos Cuantitativos

Danilo Leiva-Leon

Central Bank of Chile

Multiple version iconThere are 2 versions of this paper

Date Written: October 01, 2014

Abstract

This paper examines the business cycle linkages that propagate industry-specific business cycle shocks throughout the economy in a way that (sometimes) generates aggregated cycles. The transmission of sectoral business cycles is modelled through a multivariate Markov-switching model, which is estimated by Gibbs sampling. Using nonparametric density estimation approaches, we find that the number and location of modes in the distribution of industrial dissimilarities change over the business cycle. There is a relatively stable trimodal pattern during expansionary and recessionary phases characterized by highly, moderately and lowly synchronized industries. However, during phase changes, the density mass spreads from moderately synchronized industries to lowly synchronized industries. This agrees with a sequential transmission of the industrial business cycle dynamics.

JEL Classification: C22, E27, E32

Suggested Citation

Camacho, Maximo and Leiva-Leon, Danilo, The Propagation of Industrial Business Cycles (October 01, 2014). Available at SSRN: https://ssrn.com/abstract=2691668 or http://dx.doi.org/10.2139/ssrn.2691668

Maximo Camacho

Autonomous University of Barcelona - Department of Economics ( email )

Avda. Diagonal 690
Barcelona, 08034
Spain

Universidad de Murcia - Departamento de Metodos Cuantitativos ( email )

Campus de Espinardo
30100 Murcia
Spain
+34 968 367 982 (Phone)

Danilo Leiva-Leon (Contact Author)

Central Bank of Chile ( email )

Research Department
Huerfanos 1185
Santiago
Chile

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