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

  • Issler, J.V.
  • Vahid, F.

    ()

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.

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File URL: http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2001/wp9-01.pdf
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Paper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 9/01.

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Length: 34 pages
Date of creation: Jul 2001
Date of revision:
Handle: RePEc:msh:ebswps:2001-9
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  1. Nathan S. Balke & Thomas B. Fomby, 1992. "Threshold cointegration," Research Paper 9209, Federal Reserve Bank of Dallas.
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  9. Birchenhall, Chris R, et al, 1999. "Predicting U.S. Business-Cycle Regimes," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(3), pages 313-23, July.
  10. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
  11. Zellner, Arnold & Min, Chung-ki, 1998. "Forecasting turning points in countries' output growth rates: A response to Milton Friedman," Journal of Econometrics, Elsevier, vol. 88(2), pages 203-206, November.
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  13. 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.
  14. Birchenhall, Chris R & Osborn, Denise R & Sensier, Marianne, 2001. "Predicting UK Business Cycle Regimes," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(2), pages 179-95, May.
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  16. Anderson, Heather M, 1997. "Transaction Costs and Non-linear Adjustment towards Equilibrium in the US Treasury Bill Market," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(4), pages 465-84, November.
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  25. Hecq, Alain & Palm, Franz C & Urbain, Jean-Pierre, 2000. " Permanent-Transitory Decomposition in VAR Models with Cointegration and Common Cycles," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(4), pages 511-32, September.
  26. Vahid, F & Engle, Robert F, 1993. "Common Trends and Common Cycles," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(4), pages 341-60, Oct.-Dec..
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