A Measure of Comovement for Economic Variables: Theory and Empirics

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A Measure of Comovement for Economic Variables: Theory and Empirics

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Croux, Christophe
Forni, Mario
Reichlin, Lucrezia

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Abstract

This paper proposes a measure of dynamic comovement between (possibly many) time series and names it cohesion. The measure is defined in the frequency domain and is appropriate for processes that are costationary, possibly after suitable transformations. In the bivariate case, the measure reduces to dynamic correlation and is related, but not equal, to the well-known quantities coherence and coherency. Dynamic correlation on a frquency band equals (static) correlation of band-pass filtered series. Moreover, long run correlation and cohesion relate in a simple way to cointegration. Cohesion is useful to study problems of business cycle synchronization, to investigate short-run and long-run dynamic properties of multiple time series, to identify dynamic clusters. We use state income data for the US and GDP data for European nations to provide an empirical illustration focused on the geographical aspects of business cycle fluctuations.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2339.

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Date of creation: Dec 1999
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Handle: RePEc:cpr:ceprdp:2339

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Article
- Christophe Croux & Mario Forni & Lucrezia Reichlin, 2001. "A Measure Of Comovement For Economic Variables: Theory And Empirics," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 232-241, May. [Downloadable!] (restricted)

Find related papers by JEL classification:
C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - General
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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