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Turning point chronology for the Euro-Zone: A Distance Plot Approach

  • Peter Martey Addo


    (Axe Finance - EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Università Ca' Foscari of Venice - Department of Economics - CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS)

  • Monica Billio


    (Università Ca' Foscari of Venice - Department of Economics)

  • Dominique Guegan


    (Axe Finance - EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS)

We propose a transparent way of establishing a turning point chronology for the Euro-zone business cycle. Our analysis is achieve by exploiting the concept of recurrence plots, in this case distance plot, to characterize and detect turning points in the business cycle for any economic system. Firstly, we exploit the concept of recurrence plots on the US Industrial Production Index (IPI) series to serve as a beachmark for our analysis since there already exist reference chronology for the US business cycle, provided by the Dating Committee of the National Bureau of Economic Research (NBER). We then use this concept in constructing a turning point chronology for the Euro-zone business cycle. In particular, we show that this approach permits to detect turning points and study the business cycle without a priori assumptions on the statistical properties on the underlying economic indicator.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00803457.

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Date of creation: Feb 2013
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Handle: RePEc:hal:cesptp:halshs-00803457
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  1. Artis, Michael J & Marcellino, Massimiliano & Proietti, Tommaso, 2004. "Characterizing the Business Cycle for Accession Countries," CEPR Discussion Papers 4457, C.E.P.R. Discussion Papers.
  2. Peter Martey Addo & Monica Billio & Dominique Guegan, 2012. "Alternative Methodology for Turning-Point Detection in Business Cycle: A Wavelet Approach," Documents de travail du Centre d'Economie de la Sorbonne 12023, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  3. Fagan, Gabriel & Henry, Jérôme & Mestre, Ricardo, 2001. "An area-wide model (AWM) for the euro area," Working Paper Series 0042, European Central Bank.
  4. Addo, Peter Martey & Billio, Monica & Guégan, Dominique, 2013. "Nonlinear dynamics and recurrence plots for detecting financial crisis," The North American Journal of Economics and Finance, Elsevier, vol. 26(C), pages 416-435.
  5. Pilar Bengoechea & Gabriel Pérez-Quirós, 2004. "A useful tool to identify recessions in the euro-area," Banco de Espa�a Working Papers 0419, Banco de Espa�a.
  6. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1.
  7. Andrew C. Harvey & Thomas M. Trimbur, 2003. "General Model-Based Filters for Extracting Cycles and Trends in Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 244-255, May.
  8. Michael ARTIS & Massimiliano MARCELLINO & Tommaso PROIETTI, 2002. "Dating the Euro Area Business Cycle," Economics Working Papers ECO2002/24, European University Institute.
  9. Jacques Anas & Monica Billio & Laurent Ferrara & Gian Luigi Mazzi, 2008. "A System For Dating And Detecting Turning Points In The Euro Area," Manchester School, University of Manchester, vol. 76(5), pages 549-577, 09.
  10. Belaire-Franch, Jorge, 2004. "Testing for non-linearity in an artificial financial market: a recurrence quantification approach," Journal of Economic Behavior & Organization, Elsevier, vol. 54(4), pages 483-494, August.
  11. Monica Billio & Roberto Casarin, 2010. "Identifying business cycle turning points with sequential Monte Carlo methods: an online and real-time application to the Euro area," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 29(1-2), pages 145-167.
  12. Jacques Anas & Laurent Ferrara, 2004. "Detecting Cyclical Turning Points: The ABCD Approach and Two Probabilistic Indicators," Journal of Business Cycle Measurement and Analysis, OECD Publishing,Centre for International Research on Economic Tendency Surveys, vol. 2004(2), pages 193-225.
  13. Peter Martey Addo & Monica Billio & Dominique Guegan, 2013. "Understanding Exchange Rates Dynamics," Documents de travail du Centre d'Economie de la Sorbonne 13023, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  14. McAdam, Peter, 2003. "US, Japan and the euro area: comparing business-cycle features," Working Paper Series 0283, European Central Bank.
  15. Monica Billio & Jacques Anas & Laurent Ferrara & Marco Lo Duca, 2007. "A turning point chronology for the Euro-zone," Working Papers 2007_33, Department of Economics, University of Venice "Ca' Foscari".
  16. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
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