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Dating Business Cycles: A Methodological Contribution with an Application to the Euro Area

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  • Michael Artis
  • Massimiliano Marcellino
  • Tommaso Proietti

Abstract

This paper proposes a dating algorithm based on an appropriately defined Markov chain that enforces alternation of peaks and troughs, and duration constraints concerning the phases and the full cycle. The algorithm, which implements Harding and Pagan's non‐parametric dating methodology, allows an assessment of the uncertainty of the estimated turning points caused by filtering and can be used to construct indices of business cycle diffusion, aiming at assessing how widespread are cyclical movements throughout the economy. Its adaptation to the notion of a deviation cycle and the imposition of depth constraints are also discussed. We illustrate the algorithm with reference to the issue of dating the euro‐area business cycle and analysing its characteristics, both from the classical and the growth cycle perspectives.

Suggested Citation

  • Michael Artis & Massimiliano Marcellino & Tommaso Proietti, 2004. "Dating Business Cycles: A Methodological Contribution with an Application to the Euro Area," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(4), pages 537-565, September.
  • Handle: RePEc:bla:obuest:v:66:y:2004:i:4:p:537-565
    DOI: 10.1111/j.1468-0084.2004.00092.x
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    References listed on IDEAS

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    1. Harding, Don & Pagan, Adrian, 2003. "Rejoinder to James Hamilton," Journal of Economic Dynamics and Control, Elsevier, vol. 27(9), pages 1695-1698, July.
    2. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
    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. Harding, Don & Pagan, Adrian, 2003. "A comparison of two business cycle dating methods," Journal of Economic Dynamics and Control, Elsevier, vol. 27(9), pages 1681-1690, July.
    5. Harding, Don & Pagan, Adrian, 2001. "Extracting, Using and Analysing Cyclical Information," MPRA Paper 15, University Library of Munich, Germany.
    6. 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.
    7. Harding, Don & Pagan, Adrian, 2006. "Synchronization of cycles," Journal of Econometrics, Elsevier, vol. 132(1), pages 59-79, May.
    8. 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 377-389, October.
    9. Hamilton, James D., 2003. "Comment on "A comparison of two business cycle dating methods"," Journal of Economic Dynamics and Control, Elsevier, vol. 27(9), pages 1691-1693, July.
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