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Business cycle clocks: Time to get circular

Author

Listed:
  • Nuno Lourenço

    (Banco de Portugal)

  • António Rua

    (Banco de Portugal
    Nova SBE)

Abstract

Assessing the momentum of the business cycle is of utmost importance for policymakers and private agents. In this respect, the use of business cycle clocks has gained prominence among national and international institutions to depict the current stage of the business cycle. Drawing on circular statistics, we propose a novel approach to business cycle clocks in a data-rich environment. The method is applied to the main euro area countries resorting to a large data set covering the last three decades. We document the usefulness of the circular business cycle clock to capture the business cycle stage, including peaks and troughs, with the findings being supported by the cross-country evidence.

Suggested Citation

  • Nuno Lourenço & António Rua, 2023. "Business cycle clocks: Time to get circular," Empirical Economics, Springer, vol. 65(4), pages 1513-1541, October.
    • Handle: RePEc:spr:empeco:v:65:y:2023:i:4:d:10.1007_s00181-023-02405-x
    DOI: 10.1007/s00181-023-02405-x
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    References listed on IDEAS

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    Cited by:

    1. António Rua & Nuno Lourenço & João Quelhas, 2023. "Navigating with a compass: Charting the course of underlying inflation," Working Papers w202317, Banco de Portugal, Economics and Research Department.

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    More about this item

    Keywords

    Business cycle clock; Circular statistics; Peaks; Troughs;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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