Abstract In this article, we present a comprehensive analysis of business cycles in Japan from 1975 to 2023, focusing on the mechanisms that underlie economic fluctuations. We develop a novel methodology to construct a comprehensive index of business cycles (CIBC) by integrating 30 indicators commonly used in business cycle analysis in Japan. Unlike traditional approaches, our method simultaneously incorporates all business cycle indicators with adjusted lags, which enhances its precision and scope. We decompose each indicator’s time series using an extended moving linear model, which ensures robustness amid abnormal fluctuations. We propose a two-lag time-varying loading factor model to analyze the lead-lag relationship between the CIBC and each variable using a distribution-free dynamic linear modeling method. In our analysis, we elucidate the complex interactions between key indicators and a common factor, which explains the dynamics of business fluctuations. We conducted a comprehensive empirical study using Japanese business cycle indicator data to demonstrate the performance of the proposed methodology. Despite its limitations, our study provides valuable insights that enable us to understand the mechanisms of business cycles in Japan from the perspective of empirical analysis. Our study lays the groundwork for future research in this area.
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313 Articles
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Articles published on Abnormal Fluctuations
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