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Should we really care about building business cycle coincident indexes!

  • Alain Hecq

Quite often, the goal of the game when developing new coincident indexes of the economic activity is the comparison with NBER turning points. Using Monte Carlo simulations, this note illustrates that for the USA, any random linear combination of the four coincident variables would do the job as good as other more complicated methods.

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Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

Volume (Year): 12 (2005)
Issue (Month): 3 ()
Pages: 141-144

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Handle: RePEc:taf:apeclt:v:12:y:2005:i:3:p:141-144
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  1. Issler, J.V. & Vahid, F., 2001. "The Missing Link: Using the NBER Recession Indicator to Construct Coincident and Leading Indices of Economic Activity," Monash Econometrics and Business Statistics Working Papers 9/01, Monash University, Department of Econometrics and Business Statistics.
  2. Cubadda, Gianluca & Hecq, Alain, 2001. "On non-contemporaneous short-run co-movements," Economics Letters, Elsevier, vol. 73(3), pages 389-397, December.
  3. Don Harding & Adrian Pagan, 1999. "Dissecting the Cycle," Melbourne Institute Working Paper Series wp1999n13, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  4. Harding, Don & Pagan, Adrian, 2002. "Dissecting the cycle: a methodological investigation," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 365-381, March.
  5. James H. Stock & Mark W. Watson, 1993. "A Procedure for Predicting Recessions with Leading Indicators: Econometric Issues and Recent Experience," NBER Chapters, in: Business Cycles, Indicators and Forecasting, pages 95-156 National Bureau of Economic Research, Inc.
  6. Camacho, Maximo & Pérez Quirós, Gabriel, 2000. "This is what the US leading indicators lead," Working Paper Series 0027, European Central Bank.
  7. 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, 07.
  8. Rebecca A Emerson & David Hendry, 1994. "An evaluation of forecasting using leading indicators," Economics Papers 5., Economics Group, Nuffield College, University of Oxford.
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