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Dating the Euro Area Business Cycle

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  • Michael ARTIS
  • Massimiliano MARCELLINO
  • Tommaso PROIETTI

Abstract

In this Paper we compare alternative approaches for dating the euro area business cycle and analysing its characteristics. First, we extend a commonly used dating procedure to allow for length, size and amplitude restrictions, and to compute the probability of a phase change. Second, we apply the modified algorithm for dating both the classical euro area cycle and the deviation cycle, where the latter is obtained by a variety of methods, including a modified HP filter that reproduces the features of the BK filter but avoids end-point problems, and a production function based approach. Third, we repeat the dating exercise for the main euro area countries, evaluate the degree of synchronization, and compare the results with the UK and the US. Fourth, we construct indices of business cycle diffusion, and assess how widespread are cyclical movements throughout the economy. Finally we repeat the dating exercise using monthly industrial production data, to evaluate whether the higher sampling frequency can compensate the higher variability of the series and produce a more accurate dating.

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Bibliographic Info

Paper provided by European University Institute in its series Economics Working Papers with number ECO2002/24.

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Date of creation: 2002
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Handle: RePEc:eui:euiwps:eco2002/24

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  1. Siem Jan Koopman & Neil Shephard & Jurgen A. Doornik, 1999. "Statistical algorithms for models in state space using SsfPack 2.2," Econometrics Journal, Royal Economic Society, vol. 2(1), pages 107-160.
  2. Harding, Don & Pagan, Adrian, 2006. "Synchronization of cycles," Journal of Econometrics, Elsevier, vol. 132(1), pages 59-79, May.
  3. James H. Stock & Mark W. Watson, 2003. "Has the Business Cycle Changed and Why?," NBER Chapters, in: NBER Macroeconomics Annual 2002, Volume 17, pages 159-230 National Bureau of Economic Research, Inc.
  4. Andrew C. Harvey & Thomas M. Trimbur, 2003. "General Model-Based Filters for Extracting Cycles and Trends in Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 244-255, May.
  5. Marianne Baxter & Robert G. King, 1995. "Measuring Business Cycles Approximate Band-Pass Filters for Economic Time Series," NBER Working Papers 5022, National Bureau of Economic Research, Inc.
  6. Harvey,Andrew C., 1990. "Forecasting, Structural Time Series Models and the Kalman Filter," Cambridge Books, Cambridge University Press, number 9780521321969, October.
  7. Beaudry, Paul & Koop, Gary, 1993. "Do recessions permanently change output?," Journal of Monetary Economics, Elsevier, vol. 31(2), pages 149-163, April.
  8. Beyer, A. & Doornik, J.A. & Hendry, D.F., 2000. "Constructing Historical Euro-Zone Data," Economics Working Papers eco2000/10, European University Institute.
  9. Altissimo, Filippo & Bassanetti, Antonio & Cristadoro, Riccardo & Forni, Mario & Hallin, Marc & Lippi, Marco & Reichlin, Lucrezia & Veronese, Giovanni, 2001. "EuroCOIN: A Real Time Coincident Indicator of the Euro Area Business Cycle," CEPR Discussion Papers 3108, C.E.P.R. Discussion Papers.
  10. Tommaso Proietti & Alberto Musso & Thomas Westermann, 2007. "Estimating potential output and the output gap for the euro area: a model-based production function approach," Empirical Economics, Springer, vol. 33(1), pages 85-113, July.
  11. Harding, Don & Pagan, Adrian, 2001. "Extracting, Using and Analysing Cyclical Information," MPRA Paper 15, University Library of Munich, Germany.
  12. Gerhard Bry & Charlotte Boschan, 1971. "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs," NBER Books, National Bureau of Economic Research, Inc, number bry_71-1, May.
  13. Harvey, Andrew C & Koopman, Siem Jan, 1992. "Diagnostic Checking of Unobserved-Components Time Series Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(4), pages 377-89, October.
  14. Agresti, Anna Maria & Mojon, BenoƮt, 2001. "Some stylised facts on the euro area business cycle," Working Paper Series 0095, European Central Bank.
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