Boom-Bust Cycles and Crisis Periods in the Philippines : A Regime-Switching Analysis

This study examines Philippine macroeconomic fluctuations using Markov regime-switching techniques. Using all available GDP data, an annual and a quarterly model are constructed to explain Philippine boom-bust cycles as switches into any of three states — a moderate growth state, a low growth state and a crisis state. The number and labeling of states are based on historical events. The annual model shows adequate tracking ability. The quarterly model reveals a finer classification of the bust phase into low growth states and crisis states for the 1990-decade — a result that does not appear in the annual model. The crisis dates determined by the quarterly model closely correspond to the four crisis episodes that occurred between 1981 and 1999.