European business cycles: new indices and analysis of their synchronicity
AbstractThis article presents a new type of business-cycle index that allows for cycle-to-cycle comparisons of the depth of recessions within a country, cross-country comparisons of business-cycle correlation and simple aggregation to arrive at a measure of a European business cycle. The paper examines probit-type specifications of binary recession/expansion variables in a Gibbs-sampling framework, wherein it is possible to incorporate time-series features to the model, such as serial correlation, heteroskedasticity and regime switching. The data-augmentation implied by Gibbs sampling generates posterior distributions for a latent coincident business-cycle index and extracts information from indicator variables, such as the slope of the yield curve. Sub-sample correlations between an aggregated ``Europe'' index and the national business-cycle indices from France, Germany, Italy are consistent with the claim that the European economies are becoming more harmonized over time, but there is no guarantee that this pattern will hold in the future.
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Bibliographic InfoPaper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 1999-019.
Date of creation: 2001
Date of revision:
Publication status: Published in Economic Inquiry, January 2003, 41(1), pp. 116-31
Other versions of this item:
- M. Dueker & K. Wesche, 1999. "European Business Cycles: New Indices and Analysis of their Synchronicity," Discussion Paper Serie B 448, University of Bonn, Germany.
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
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