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European Business Cycles: New Indices and Analysis of their Synchronicity

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  • M. Dueker
  • K. Wesche

Abstract

his article presents a new type of business-cycle index that allowsM for cycle-to-cycle comparisons of the depth of recessions within a country,M cross-country comparisons of business-cycle correlation andM simple aggregation to arrive at a measure of a European business cycle.M The paper examines probit-type specifications of binary recession/expansionM variables in a Gibbs-sampling framework, wherein it is possible to incorporateM time-series features to the model, such as serial correlation,M heteroscedasticity and regime switching. The data-augmentation impliedM by Gibbs sampling generates posterior distributions for a latent coincidentM business-cycle index and extracts information from indicator variables,M such as the slope of the yield curve.M Sub-sample correlations between an aggregated `Europe'' index andM the national business-cycle indices from France, Germany, ItalyM are consistent with the claimM that the European economies are becoming more harmonizedM over time, but there is no guarantee that this patternM will hold in the future.

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Bibliographic Info

Paper provided by University of Bonn, Germany in its series Discussion Paper Serie B with number 448.

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Length: pages
Date of creation: Feb 1999
Date of revision:
Handle: RePEc:bon:bonsfb:448

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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de

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Keywords: Recessions; Gibbs sampler; cyclical indicators;

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References

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  1. Artis, Michael J & Zhang, W, 1997. "International Business Cycles and the ERM: Is There a European Business Cycle?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 2(1), pages 1-16, January.
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  3. Artis, Michael J & Zhang, Wenda, 1999. "Further Evidence on the International Business Cycle and the ERM: Is There a European Business Cycle?," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 120-32, January.
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  5. Dueker, Michael, 1999. "Conditional Heteroscedasticity in Qualitative Response Models of Time Series: A Gibbs-Sampling Approach to the Bank Prime Rate," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 17(4), pages 466-72, October.
  6. Henri Bernard & Stefan Gerlach, 1996. "Does the term structure predict recessions? The international evidence," BIS Working Papers 37, Bank for International Settlements.
  7. Hughes Hallett, Andrew & Piscitelli, Laura, 1999. "EMU in Reality: The Effect of a Common Monetary Policy on Economies with Different Transmission Mechanisms," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2068, C.E.P.R. Discussion Papers.
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  14. Chib, Siddhartha, 1996. "Calculating posterior distributions and modal estimates in Markov mixture models," Journal of Econometrics, Elsevier, Elsevier, vol. 75(1), pages 79-97, November.
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Cited by:
  1. Papageorgiou, Theofanis & Michaelides, Panayotis G. & Milios, John G., 2010. "Business cycles synchronization and clustering in Europe (1960-2009)," Journal of Economics and Business, Elsevier, Elsevier, vol. 62(5), pages 419-470, September.
  2. Máximo Camacho & Gabriel Pérez-Quirós & Lorena Saiz, 2005. "Do european business cycles look like one?," Banco de Espa�a Working Papers 0518, Banco de Espa�a.
  3. Goddard, John & Tavakoli, Manouche & Wilson, John O.S., 2009. "Sources of variation in firm profitability and growth," Journal of Business Research, Elsevier, Elsevier, vol. 62(4), pages 495-508, April.
  4. Marek Lubiński, 2007. "International Business Cycle," Contemporary Economics, University of Finance and Management in Warsaw, University of Finance and Management in Warsaw, vol. 1(2), June.
  5. Bernd Süssmuth, 2002. "National and Supranational Business Cycles (1960-2000): A multivariate description of central G7 and EURO15 NIPA aggregates," CESifo Working Paper Series 658, CESifo Group Munich.
  6. Maximo Camacho & Gabriel Perez-Quiros & Lorena Saiz & Universidad de Murcia, 2006. "Do european business cycles look like one $\_?$," Computing in Economics and Finance 2006, Society for Computational Economics 175, Society for Computational Economics.

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