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Plucking models of business cycle fluctuations: Evidence from the G-7 countries
[chapter]
2002
Advances in Markov-Switching Models
Preserved Fulltext
Friedman's 'plucking' model, in which output cannot exceed a ceiling level but is occasionally plucked downward by recessions, is tested using Kim and Nelson's formal econometric specification on output data from the G-7 countries. Considerable support for the model is obtained, leading us to conclude that during normal periods, output seems to be driven mostly by permanent shocks, but during recessions and highgrowth recoveries, transitory shocks dominate. During these periods macroeconomic
doi:10.1007/978-3-642-51182-0_6
fatcat:ijwvfq2wyjaljfdrd5slote5ta