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The Missing Link: Using the NBER Recession Indicator to Construct Coincident and Leading Indices of Economic Activity

Author

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  • Issler, J.V.
  • Vahid, F.

Abstract

We use the information content in the decisions of the NBER Business cycle Dating Committee to construct coincident and leading indices of economic activity for United States. Specifically, we use canonical correlation analysis to filter out the noisy information contained in the coincident series. Finally, to construct our preferred coincident index of the U.S. business cycle, we take account of measurement error in the commonly used coincident series by using instrumental-variable methods. The resulting index is a simple linear combination of four coincident series that encompassed currently popular coincident indices.

Suggested Citation

  • 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.
    • Handle: RePEc:msh:ebswps:2001-9
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    File URL: http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2001/wp9-01.pdf
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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