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The Missing Link: Using the NBER Recession Indicator to Construct Coincident and Leading Indices of Economic Activity

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  • Issler, João Victor
  • Vahid, Farshid

Abstract

We use the information content in the decisions of the NBER Business cycle Dating Committee to construct coincident and leading indices of economic activity for United States. Specifically, we use canonical correlation analysis to filter out the noisy information contained in the coincident series. Finally, to construct our preferred coincident index of the U.S. business cycle, we take account of measurement error in the commonly used coincident series by using instrumental-variable methods. The resulting index is a simple linear combination of four coincident series that encompassed currently popular coincident indices.

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Paper provided by FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) in its series Economics Working Papers (Ensaios Economicos da EPGE) with number 450.

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Date of creation: 01 Jun 2002
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Handle: RePEc:fgv:epgewp:450

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