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A real-time recession indicator for the Euro area

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Author Info
Ferrara, Laurent

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Abstract

In this paper, we propose a new coincident monthly indicator to detect in real-time the start and the end of an economic recession phase for the Euro area. In this respect, we use the methodology proposed in Anas and Ferrara (2002, 2004) as regards the recession indicator for the US, based on Markov-Switching processes popularized in economics by Hamilton (1989). By using a set of four monthly time series, we show that this start-end recession indicator (SERI) is able to reproduce all the recession phases experienced by the Euro area since 1970. Concerning the last low phase of the growth cycle in the Euro area, started in 2001, empirical results show that the Euro area experienced a « quasi-recession » phase, located between the end of the 2001 year and the beginning of 2002, without a global recession. This is due to a lack of diffusion of this phenomena among the main Eurozone countries, though it was synchronized.

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File URL: http://mpra.ub.uni-muenchen.de/4042/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 4042.

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Date of creation: Jun 2006
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Handle: RePEc:pra:mprapa:4042

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Related research
Keywords: Recession real-time probabilistic indicator Euro area.

Find related papers by JEL classification:
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Sichel, Daniel E, 1994. "Inventories and the Three Phases of the Business Cycle," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 269-77, July.
  2. Krolzig, H.-M. & Toro, J., 1999. "A New Approach to the Analysis of Shocks and the Cycle in a Model of Output and Employment," Economics Working Papers eco99/30, European University Institute.
  3. Clements, Michael P & Krolzig, Hans-Martin, 2003. "Business Cycle Asymmetries: Characterization and Testing Based on Markov-Switching Autoregressions," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(1), pages 196-211, January.
  4. Monica Billio & Jacques Anas & Laurent Ferrara & Marco Lo Duca, 2007. "A turning point chronology for the Euro-zone," Working Papers 2007_33, University of Venice "Ca' Foscari", Department of Economics. [Downloadable!]
  5. Garcia, Rene, 1998. "Asymptotic Null Distribution of the Likelihood Ratio Test in Markov Switching Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 763-88, August.
  6. Ferrara, Laurent, 2003. "A three-regime real-time indicator for the US economy," Economics Letters, Elsevier, vol. 81(3), pages 373-378, December. [Downloadable!] (restricted)
  7. Laurent Ferrara, 2007. "Point and interval nowcasts of the Euro area IPI," Applied Economics Letters, Taylor and Francis Journals, vol. 14(2), pages 115-120. [Downloadable!] (restricted)
  8. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, vol. 80(2), pages 355-385, October. [Downloadable!] (restricted)
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  9. Layton, Allan P & Smith, Daniel, 2000. "A Further Note on the Three Phases of the US Business Cycle," Applied Economics, Taylor and Francis Journals, vol. 32(9), pages 1133-43, July. [Downloadable!] (restricted)
  10. Grasmann, P. & Keereman, F., 2001. "An Indicator-Based Short-Term Forecast for Quarterly GDP in the Euro Area," European Economy - Economic Papers 154, Commission of the EC, Directorate-General for Economic and Financial Affairs (DG ECFIN).
  11. Máximo Camacho & Gabriel Pérez-Quirós & Lorena Saiz, 2005. "Do european business cycles look like one?," Banco de España Working Papers 0518, Banco de España. [Downloadable!]
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  12. Marcelle Chauvet & Jeremy M. Piger, 2003. "Identifying business cycle turning points in real time," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 47-61. [Downloadable!]
    Other versions:
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