Arbeitspapier
Tracking Growth and the Business Cycle: a Stochastic Common Cycle Model for the Euro Area
This paper proposes a new model-based method to obtain a coincident indicator for the business cycle. A dynamic factor model with trend components and a common cycle component is considered which can be estimated using standard maximum likelihood methods. The multivariate unobserved components model includes a stationary higher order cycle. Also higher order trends can be part of the analysis. These generalisationslead to a business cycle that is similar to a band-pass one. Furthermore, cycle shifts for individual time series are incorporated within the model and estimated simultaneously with the remaining parameters. This feature permits the use of leading, coincident and lagging variables to obtain thebusiness cycle coincident indicator without prior analysis of their lead-lag relationship. Besides the business cycle indicator, the model-based approach also allows to get a growth rate indicator. In the empirical analysis for the Euro area, both indicators are obtained based on nine key economic timeseries including gross domestic product, industrial production,unemployment, confidence indicators and interest rate spread. This analysis contrasts sharply with earlier multivariate approaches. In particular, our more parsimonious approach leads to a growth rate indicator for the Euro area that is similar to the one of EuroCOIN. The latter is based on a more involvedapproach by any standard and uses hundreds of time series from individual countries belonging to the Euro area.
- Language
-
Englisch
- Bibliographic citation
-
Series: Tinbergen Institute Discussion Paper ; No. 03-069/4
- Classification
-
Wirtschaft
Estimation: General
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Business Fluctuations; Cycles
- Subject
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Band-pass filter
Coincident indicator
Dynamic factor model
Kalman filter
Leading indicator
Unobserved components time series model
Phase shift
Revisions
Wirtschaftswachstum
Konjunktur
Dynamisches Modell
Konjunkturtheorie
Eurozone
Schätzung
Theorie
EU-Staaten
- Event
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Geistige Schöpfung
- (who)
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e Azevedo, Joao Valle
Koopman, Siem Jan
Rua, Antonio
- Event
-
Veröffentlichung
- (who)
-
Tinbergen Institute
- (where)
-
Amsterdam and Rotterdam
- (when)
-
2003
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- e Azevedo, Joao Valle
- Koopman, Siem Jan
- Rua, Antonio
- Tinbergen Institute
Time of origin
- 2003
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