Abstract
The main objective of the paper is to investigate properties of business cycles in the Polish economy before and after the recent crisis. The essential issue addressed here is whether there is statistical evidence that the recent crisis has affected the properties of the business cycle fluctuations. In order to improve robustness of the results, we do not confine ourselves to any single inference method, but instead use different groups of statistical tools, including non-parametric methods based on subsampling and parametric Bayesian methods. We examine monthly series of industrial production (from January 1995 till December 2014), considering the properties of cycles in growth rates and in deviations from long-run trend. Empirical analysis is based on the sequence of expanding-window samples, with the shortest sample ending in December 2006. The main finding is that the two frequencies driving business cycle fluctuations in Poland correspond to cycles with periods of 2 and 3.5 years, and (perhaps surprisingly) the result holds both before and after the crisis. We, therefore, find no support for the claim that features (in particular frequencies) that characterize Polish business cycle fluctuations have changed after the recent crisis. The conclusion is unanimously supported by various statistical methods that are used in the paper, however, it is based on relatively short series of the data currently available.
Highlights
The global financial crisis, with its origins in August 2007, has addressed the need of a major rethinking in macroeconomics, changing substantially directions of the frontier research
In order to evaluate potential influence of the recent crisis on business cycle pattern, the empirical analysis to follow is based on the sequence of expanding-window samples, with the shortest sample ending in December 2006, and the longest one ending in December 2014
The essential issue addressed here is whether formal methods of statistical inference provide evidence supporting the view that the recent crisis has changed the properties of the business cycle fluctuations
Summary
The global financial crisis, with its origins in August 2007, has addressed the need of a major rethinking in macroeconomics, changing substantially directions of the frontier research. Abrupt, strong and omnipresent effects of the crisis in the US subprime market affecting the global economic growth, prompted new studies on the nature of the procyclicality of the financial system, which has existed in macroeconomics through decades as a topic of secondary importance; see Woodford (2003). The aforementioned major rethinking in macroeconomics has paved new routes for researchers, but it showed some new perspectives of problems that have been studied for decades. The empirical macroeconomics was focused on the observed correlation of changes of the world economic activity. The years preceding the crisis have seen new studies focused on construction of appropriate measures of synchronization of the business cycles rather, than examining well established properties of the cycle in the most of economies (see Stock & Watson, 2005; Doyle & Faust, 2005; Imbs, 2004; Kose et al, 2003; Kose et al, 2008)
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