Template-type: ReDIF-Article 1.0 Author-Name: Bernd Brandl Author-Email: bernd.brandl@univie.ac.at Title: An optimized forecast specification for economic activity: An automated discovery approach using a genetic algorithm Abstract: Finding a good forecasting model in a data-rich environment is a complex problem which challenges forecasters and statistical methods. In such an environment, automated modelling strategies are necessary for an efficient use of the information in the data. In contrast to frequently applied methods used for large data sets we propose a model selection approach for dynamic single equation regressions that are used to make forecasts. This paper proposes a new approach for quantitative forecasting that is able to deal with both an increasing number of variables that are potentially important for forecasting, as well as an increasing number of observations simultaneously. Another characteristic of the proposed approach is that evaluation of the goodness of forecast models is based on different criteria. As we are interested in finding forecast models with high-quality criteria we define the search for a forecast model as a multi-criteria optimization problem. We define the quality criteria in our goal function by in-sample measures and out-of-sample measures, as well as by a balance between them, and apply a genetic algorithm to solve this complex, global and discrete multi-criteria optimization problem. The efficiency of the approach is illustrated by forecasting German industrial production based on a data set containing key economic indicators and leading indicators. It is shown that, for short forecast horizons, the proposed approach provides forecasts with a high accuracy. Keywords: Forecasting, Industrial Production, Automated Modelling, Model Selection Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2009 Pages: 9-36 Volume: 2008 Issue: 1 Handle: RePEc:oec:stdkab:5KSNLXPF68JB Template-type: ReDIF-Article 1.0 Author-Name: Jochen Hartwig Author-Email: hartwig@kof.ethz.ch Title: Trying to assess the quality of macroeconomic data: The case of Swiss labour productivity growth as an example Abstract: Macroeconomic data are indispensable for modern governance, yet it is often unclear how reliable these data are. The production process of macroeconomic data inside the statistical offices is often not very transparent for the general public. Bystanders usually have no choice but to take for granted the published data because criteria by which to judge data quality are wanting. Hoping to contribute to a better understanding of the quality of macroeconomic data, this paper proposes several plausibility checks and applies them to recently published Swiss labour productivity growth figures. Although the proposed checks cannot "prove" or "disprove" the official data, they are capable of either strengthening our confidence in the official data or, alternatively, of casting them into doubt. Policy debates drawing on official data will hardly be able to ignore differences in the degree of confidence with which these data are held to be accurate. Keywords: Accuracy of Macroeconomic Observations, Statistical Artefacts, Labour Productivity Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2009 Pages: 37-61 Volume: 2008 Issue: 1 Handle: RePEc:oec:stdkab:5KSNLXP7SNLX Template-type: ReDIF-Article 1.0 Author-Name: Patrick M. Crowley Author-Email: patrick.crowley@tamucc.edu Author-Name: David G. Mayes Title: How fused is the euro area core?: An evaluation of growth cycle co-movement and synchronization using wavelet analysis Abstract: This paper uses several recent advances in time-varying spectral methods to analyse the growth cycles of the core of the euro area in terms of frequency content and phasing of cycles. There are two main findings. First that coherence and phasing between the three core members of the euro area (France, Germany and Italy) continue to differ, and that for France they increased in the 1990s but not noticeably since the launch of the euro. Second that similarities vary considerably according to the length of cycle. They are high for low frequencies but lower at traditional business cycle frequencies. Simply looking at business cycles loses much of the detail of the extent of co-movement in different frequency cycles within the euro area. Keywords: Time-varying Spectral Analysis, Coherence, Phase, Business Cycles, EMU, Growth Cycles, Wavelet Analysis Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2009 Pages: 63-95 Volume: 2008 Issue: 1 Handle: RePEc:oec:stdkab:5KSNLXP3455H Template-type: ReDIF-Article 1.0 Author-Name: Luciana Crosilla Author-Email: l.crosilla@isae.it Author-Name: Solange Leproux Author-Email: s.leproux@isae.it Title: Leading indicators on construction and retail trade sectors based on ISAE survey data Abstract: According to the Commission recommendations, ISAE has recently restructured the methodological framework of its survey on firms operating in the Italian construction sector and in retail trade. The innovations specifically regard the sampling design and the weight system for both sectors; this last revision, in particular, allowed the reconstruction of the ISAE historical series. In the light of the changes introduced, first of all the aim of this paper is to analyze the cyclical features and to evaluate the "leading" performances of the new ISAE series with respect to the quantitative ISTAT data. Finally, we are going to build a "leading indicator" for both construction and retail trade in Italy. We first apply the NBER methodology in order to establish the main cyclical features of the series. Then we use cross-correlation analysis to estimate the extent to which the ISAE variables and the ISTAT series are correlated. Later on the Granger causality and out of sample tests were used to evaluate the forecasting performance of the ISAE series. On the basis of the results obtained, we finally build a leading indicator for both sectors, and test its performance comparing the results to those of the confidence index elaborated by ISAE. Keywords: Indicators, Cyclical Analysis, Construction Survey, Retail Trade Survey Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2009 Pages: 97-123 Volume: 2008 Issue: 1 Handle: RePEc:oec:stdkab:5KSNLXNW01D6 Template-type: ReDIF-Article 1.0 Author-Name: Nicolas Cuche-Curti Author-Name: Pamela Hall Author-Name: Attilio Zanetti Author-Email: attilio.zanetti@snb.ch Title: Swiss GDP revisions: A monetary policy perspective Abstract: This paper focuses on Swiss GDP revisions and the uncertainty they generate from the point of view of monetary policy. After a description of the revisions features, we use GDP vintages to compute real-time output gaps using a production function approach. Then, with a nominal feedback rule, we assess the impact of GDP – and hence output gap – on revisions monetary policy. The main results are threefold. First, Swiss GDP revisions – similarly to those of other small economies – are large, and estimates converge slowly to their final value. Second, GDP mismeasurements clearly exacerbate the difficulty in estimating output gaps. Third, the impact of revisions on monetary policy varies over time. Via its effect on output gaps, ceteris paribus, the inaccuracy of GDP estimates risks introducing a procyclical bias in monetary policy decisions. Keywords: Indicators GDP revisions, Monetary policy, Nominal feedback rule, Real-time data, Switzerland Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2009 Pages: 183-213 Volume: 2008 Issue: 2 Handle: RePEc:oec:stdkab:5KSNLH30LX41 Template-type: ReDIF-Article 1.0 Author-Name: Matthieu Darracq Paries Author-Email: matthieu.darracq_paries@ecb.int Author-Name: Laurent Maurin Author-Email: laurent.maurin@ecb.int Title: Forecasting euro area manufacturing production with country-specific trade and survey data Abstract: Several factor-based models are estimated to investigate the role of country-specific trade and survey data in forecasting euro area manufacturing production. Following Boivin and Ng (2006), the emphasis is put on the choice of the dataset chosen to estimate the factors. Four datasets are built and common factors are estimated separately on each of them following two methodologies, Stock and Watson (2002a, 2002b) and Forni et al. (2005). Then, a rolling out of sample forecast comparison exercise is carried out on nine models to compare the forecast performance of the models and the datasets. Compared to univariate benchmarks, our results are supportive of factor-based models up to two quarters. They show that incorporating survey and external trade information improves the forecast of manufacturing production. They also confirm the findings of Marcellino, Stock and Watson (2003) that, using country information, it is possible to improve forecasts for the euro area. Interestingly, the medium-sized highly opened economies provide valuable information to monitor area wide developments, beyond their weight in the aggregate. Conversely, the large countries do not add much to the monitoring of the aggregate, when considered separately. Keywords: Models, Euro Area Dataset, Forecasting Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2009 Pages: 139-160 Volume: 2008 Issue: 2 Handle: RePEc:oec:stdkab:5KSNLH37H931 Template-type: ReDIF-Article 1.0 Author-Name: Jan Jacobs Author-Name: Jan-Egbert Sturm Author-Email: sturm@kof.ethz.ch Title: The information content of KOF indicators on Swiss current account data revisions Abstract: This paper analyses revisions of Swiss current account data, taking into account the actual data revision process and the implied types of revisions. In addition we investigate whether the first release of current account data can be improved upon by the use of survey results as gathered by the KOF Swiss Economic Institute, ETH Zurich. An answer in the affirmative indicates that it is possible to improve first releases and thereby enhance the current assessment of the Swiss economy. Keywords: Current Account Statistics, Real-Time Analysis, Data Revisions, Switzerland Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2009 Pages: 161-181 Volume: 2008 Issue: 2 Handle: RePEc:oec:stdkab:5KSNLH3614ZT Template-type: ReDIF-Article 1.0 Author-Name: Christian Müller Author-Email: much@zhaw.ch Title: The information content of qualitative survey data Abstract: The information content of qualitative survey responses are confronted with the corresponding quantitative figures on a firm-by-firm basis. This comparison permits to directly check the information content of the qualitative data. The findings indicate that survey respondents provide correct information, by and large. The results lend support to the Carlson-Parkin method and may pave the way towards improving variance estimates within this method. Keywords: Quantification, Survey Data Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2009 Pages: 1-12 Volume: 2009 Issue: 1 Handle: RePEc:oec:stdkab:5KSB9DGXZ1R2 Template-type: ReDIF-Article 1.0 Author-Name: Hwee Kwan Chow Author-Email: hkchow@smu.edu.sg Author-Name: Keen Meng Choy Author-Email: kmchoy@ntu.edu.sg Title: Analyzing and forecasting business cycles in a small open economy: A dynamic factor model for Singapore Abstract: A dynamic factor model is applied to a large panel dataset of Singapore’s macroeconomic variables and global economic indicators with the initial objective of analysing business cycles in a small open economy. The empirical results suggest that four common factors – which can broadly be interpreted as world, regional, electronics and domestic economic cycles – capture a large proportion of the co-variation in the quarterly time series. The estimated factor model also explains well the observed fluctuations in real economic activity and price inflation, leading us to use it in forecasting Singapore’s business cycles. We find that the forecasts generated by the factors are generally more accurate than the predictions of univariate models and vector autoregressions that employ leading indicators. Keywords: Business Cycle, Dynamic Factor Model, Forecasting, Singapore Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2009 Pages: 19-41 Volume: 2009 Issue: 1 Handle: RePEc:oec:stdkab:5KSB9DF5NQBS Template-type: ReDIF-Article 1.0 Author-Name: Saygin Sahinöz Author-Email: saygin.sahinoz@tcmb.gov.tr Author-Name: Evren Erdogan Cosar Author-Email: evren.erdogan@tcmb.gov.tr Title: Understanding sectoral growth cycles and the impact of monetary policy in Turkish manufacturing Abstract: We pursue a two-fold objective in this paper. First, we try to describe comprehensively the behaviour of sectoral growth cycles in Turkish manufacturing by using several statistical measures and to analyse the co-movement between them via correlation and peak-through analysis. One of the remarkable results of this study is the emergence of the "chemicals" and "paper and paper products"sectors as the leading sectors of total manufacturing. Another important result reveals that export-oriented sectors, which have a high correlation with total manufacturing and with each other, appear as the main drivers of total manufacturing. The second objective of this study is to investigate the response of output in Turkish manufacturing industries to monetary policy shocks within the vector autoregressive framework. The results show that all manufacturing sectors respond to a contractionary monetary policy shock with a reduction in absolute output but that the degree of output reduction is not the same in all sectors. The total manufacturing output declines very quickly after the shock, reaching its minimum value within three quarters. Keywords: Business Cycle, Growth Cycle, Turning Points, Asymmetry Tests Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2009 Pages: 43-69 Volume: 2009 Issue: 1 Handle: RePEc:oec:stdkab:5KSB9DDVBLNR Template-type: ReDIF-Article 1.0 Author-Name: Kyung Sam Min Author-Name: Lim Sung Joo Title: Dating rules for turning points of growth cycles in Korea Abstract: A business cycle is recognized as a growth cycle in a continuously growing economy such as Korea. This paper suggests reasonable dating rules for the reference date of a business cycle using various measures of a growth cycle. These measures are a cyclical component of the coincident composite index (CI), a coincident cumulative diffusion index, and a historical diffusion index with coincident component indicators. Dating rules include identifying turning points based on these measures of the growth cycle, and various approaches which confirm and review whether these turning points are appropriate for reference dates. And the dating rules are backed up by an administrative process to determine and disseminate these turning points as the reference dates of growth cycles in Korea. The process provides a strategy that gives authority to the released reference dates and minimises errorsin the dating. However, these dating rules have strict procedures to determine the reference date because the measures of a growth cycle are revised annually and their turning points could be affected by their revisions. Usually, a new reference date requires approximately three years before it is released officially. Due to the delayed dating strategy, the present and future business conditions need to be reviewed by detecting and forecasting models of the coming turning points with leading indexes and coincident indexes. Keywords: Growth Cycle, Reference Date, Composite Index of Business Cycle Indicators, Diffusion Index, Turning Point Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2009 Pages: 1-12 Volume: 2009 Issue: 1 Handle: RePEc:oec:stdkab:5KSB9DDMMT5F Template-type: ReDIF-Article 1.0 Author-Name: Alexander Keck Author-Email: alexander.keck@wto.org Author-Name: Alexander Raubold Author-Email: raubold@bmwi.bund.de Author-Name: Alessandro Truppia Author-Email: alessandro.truppia@wto.org Title: Forecasting international trade: A time series approach Abstract: This paper develops a time series model to forecast the growth in imports by major advanced economies in the current and following year (two to six quarters ahead). Both pure time series analysis and structural approaches that include additional predictors based on economic theory are used. Our results compare favourably with other trade forecasts, as measured by standard evaluation statistics and can serve as a benchmark for more complex macroeconomic models. Keywords: Forecasting, Time Series, International Trade Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2010 Pages: 157-176 Volume: 2009 Issue: 2 Handle: RePEc:oec:stdkab:5KS9V44BDJ32 Template-type: ReDIF-Article 1.0 Author-Name: Akira Terai Author-Email: aterai@cc.kyoto-su.ac.jp Title: Measurement error in estimating inflation expectations from survey data: An evaluation by Monte Carlo simulations Abstract: This paper discusses the measurement error of conversion methods used to convert survey data to a quantitative index, especially the Carlson and Parkin (1975) method. When we want to summarise economic conditions using a numerical value, we often have to depend on survey data and convert them to a quantitative index. However, because survey research restricts responses into specific classifications and respondent’s response density may not be uniform, survey data surely include a specific error. In addition, because the distribution assumed in the Carlson–Parkin method may not fit the respondent’s distribution, this may also produce measurement error. This paper computes the measurement error of the Carlson and Parkin method in order to clarify its properties by Monte Carlo simulation. First, this paper finds that the "balance approach" contains significant error. Second, the error is large when true inflation expectations are large. Third, the error can be decreased by increasing the number of respondents. Fourth, changes in the response classification do not bring about dramatic changes compared with an increase in the number of respondents. Keywords: Inflation Expectations, Survey Data, Simulation, Carlson and Parkin Method Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2010 Pages: 133-156 Volume: 2009 Issue: 2 Handle: RePEc:oec:stdkab:5KS9V45BGGD5 Template-type: ReDIF-Article 1.0 Author-Name: José Bardaji Author-Email: jose.bardaji@dgtpe.fr Author-Name: Laurent Clavel Author-Email: laurent.clavel@finances.gouv.fr Author-Name: Frédéric Tallet Author-Email: frederic.tallet@sante.gouv.fr Title: Constructing a Markov-switching turning point index using mixed frequencies with an application to French business survey data Abstract: This paper proposes an indicator for detecting business cycles turning points incorporating mixed frequency business survey data. It is based on a hidden Markow-Switching model and allows for the detection of regime changes in a given economy where information is displayed monthly, bimonthly and quarterly. Adapting existing indicators such as Hamilton (1989) and Gregoir and Lenglart (2000) to this frequency mix constitutes the main contribution of the present work. The proposed methodology is applied to the French economy. Using balances from different business surveys, this indicator measures the probability of being in an accelerating or a decelerating phase. The indicator is compared over the past with a reference dating established upon the business cycle component of GDP e xtracted by a Christiano-Fitzerald filter. It exhibits quite clearly and timely regimes changes of the French outlook. In this case the mixed frequency methodology adapted from Gregoir and Lengart yields better performance than the Hamilton-based indicator. Considering the adequacy with the reference dating over the past, the French turning point index (TPI) provdies an accurate signal on the current outlook. Keywords: Business Cycle, Regime Change Detection, Turning Points, Hidden Markov Model Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2010 Pages: 111-132 Volume: 2009 Issue: 2 Handle: RePEc:oec:stdkab:5KS9V49Q3SWC Template-type: ReDIF-Article 1.0 Author-Name: Ard H. J. den Reijer Author-Email: a.h.j.den.reijer@dnb.nl Title: The Dutch business cycle: A finite sample approximation of selected leading indicators Abstract: In this study we construct a business cycle indicator for the Netherlands. The Christiano-Fitzgerald band-pass filtter is employed to isolate the cycle using the definition of business cycle frequencies as waves with lengths longer than 3 years and shorter than 11 years. The coincident business cycle index is based on industrial production, household consumption and staffing employment. These three variables represent key macroeconomic developments, which are also analysed by both the CEPR and NBER dating committees. The composite leading index consists of eleven indicators representing different sectors in the economy: three financial series, four business and consumer surveys and four real activity variables, of which two supply - and two demand-related. The pseudo real-time performance of the composite indicator is analyzed by the extent to which the indicator gets revised as more data becomes available. Finally, the composite leading indicator is employed in a bivariate Vector Autoregressive model to forecast GDP growth rates. Keywords: Band-Pass Filter, Turning Points, Forecasting GDP Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2010 Pages: 89-110 Volume: 2009 Issue: 2 Handle: RePEc:oec:stdkab:5KS9ZC0T7RG2 Template-type: ReDIF-Article 1.0 Author-Name: Thomas A. Knetsch Author-Email: thomas.knetsch@bundesbank.de Author-Name: Hans-Eggert Reimers Author-Email: hans-eggert.reimers@hs-wismar.de Title: Do benchmark revisions affect the consumption-to-output and investment-to-output ratios in Germany? Abstract: The balanced growth and stochastic growth theory implies stable consumption-to-output and investment-to-output ratios. It is tested by cointegration techniques for three different German data vintages. Systems cointegration tests are helpful in revealing inconsistencies across vintages. Differencing and rebasing, often used to adjust for benchmark revisions, are generally not sufficient to ensure consistent real-time macroeconomic data. Vintage transformation functions estimated by cointegrating regressions are more flexible. Empirically, the cointegrating property between consumption and output, as well as between investment and output, is often found, whereas the one-to-one relationship is mostly rejected. Moreover, the linear transformation function is helpful in describing the relation between two older final vintages. This function seems to be insufficient if the most recent data collection framework is involved. Keywords: Investment-Output Ratio, Consumption-Output Ratio, Real-Time Data, Benchmark Revisions Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2010 Pages: 1-14 Volume: 2010 Issue: 1 Handle: RePEc:oec:stdkab:5KMK0BHQQJTF Template-type: ReDIF-Article 1.0 Author-Name: Marcus Scheiblecker Author-Email: marcus.scheiblecker@wifo.ac.at Title: Chain-linking in Austrian quarterly national accounts and the business cycle Abstract: In 2005, European Union member countries began to calculate national account volume estimates using prices from the previous year, rather than from a fixed base year. For quarterly national accounts, the average of the total previous year – and not of the previous quarter – began to serve as the price basis. This allows for the use of a Laspeyres-type quantity index. In order to obtain a time series of absolute values of volume estimates, it is necessary to chain-link growth rates. This is straightforward when calculating annual figures, but when calculating quarterly figures, EU countries can choose from one of three methods. This results in different outputs, time-series properties and, possibly, price-adjusted quarterly national account figures. The current study demonstrates the different results obtained using the three methods, when applied to Austrian quarterly GDP data. I observe the consequences of consecutive time-series-based processing, such as seasonal adjustment and business cycle analysis. Although dating turning points are rather robust using all three methods, seasonal and workday adjustment and detection of outliers based on time-series modelling can be negatively affected, as can business cycle dating. Keywords: Quarterly National Accounts, Chain-Linking Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2010 Pages: 1-12 Volume: 2010 Issue: 1 Handle: RePEc:oec:stdkab:5KMK18MSNDXQ Template-type: ReDIF-Article 1.0 Author-Name: Jörg Döpke Author-Email: joerg.doepke@hs-merseburg.de Author-Name: Ulrich Fritsche Author-Email: ulrich-fritsche@wiso.uni-hamburg.de Author-Name: Boriss Siliverstovs Author-Email: siliverstovs@kof.ethz.ch Title: Evaluating German business cycle forecasts under an asymmetric loss function Abstract: Based on annual data for growth and inflation forecasts for Germany covering the 1970-2007 period and up to 17 different forecasts per year, we test for a possible asymmetry of the forecasters’ loss function and estimate the degree of asymmetry for each forecasting institution using the approach of Elliot et al. (2005). Furthermore, we test for the rationality of the forecasts under the assumption of a possibly asymmetric loss function and for the features of an optimal forecast under the assumption of a generalised loss function. We find evidence of the existence of an asymmetric loss function of German forecasters only in the case of pooled data and a quad-quad loss function. We can reject the hypothesis of rationality of the growth forecasts based on a pooled dataset, but not on data for single institutions. The rationality of inflation forecasts is frequently rejected in the case of single institutions, and also for pooled data. Keywords: Business Cycle Forecast Evaluation, Asymmetric Loss Function, Rational Expectations Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2010 Pages: 1-18 Volume: 2010 Issue: 1 Handle: RePEc:oec:stdkab:5KMLJ35RX10S Template-type: ReDIF-Article 1.0 Author-Name: Elena Angelini Author-Email: elena.angelini@ecb.europa.eu Author-Name: Marta Banbura Author-Email: elena.angelini@ecb.europa.eu Author-Name: Gerhard Rünstler Author-Email: gerhard.ruenstler@wifo.ac.at Title: Estimating and forecasting the euro area monthly national accounts from a dynamic factor model Abstract: We estimate and forecast growth in euro area monthly GDP and its components from the dynamic factor model of Doz et al. (2006), which handles unbalanced data sets in an efficient way. We extend the model to integrate interpolation and forecasting with cross-equation accounting identities. A pseudo real-time forecasting exercise indicates that the model outperforms various benchmarks, such as quarterly time-series models and bridge equations, in forecasting growth in quarterly GDP and its components. Keywords: Dynamic Factor Models, Interpolation, Nowcasting Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2010 Pages: 1-22 Volume: 2010 Issue: 1 Handle: RePEc:oec:stdkab:5KMMSXGF2QBS Template-type: ReDIF-Article 1.0 Author-Name: Gabriel Rodríguez Title: Application of Three Non-Linear Econometric Approaches to Identify Business Cycles in Peru Abstract: I use three non-linear econometric models to identify and analyze business cycles in the Peruvian economy for the period 1980:1-2008:4. The models are the Smooth Transition Autoregressive (STAR) model suggested by Teräsvirta (1994), the extended version of the MarkovSwitching model proposed by Hamilton (1989), and the plucking model of Friedman (1964, 1993). The results indicate strong rejection of the null hypothesis of linearity. The majority of models identify quarters concentrated around 1988-1989 and 1990-1991 as recession times. Other important events which happened in the Peruvian economy (natural disaster in 1983, effects of the Asian and Russian crises in 1990s, terrorist activities in 1980s) are not selected except as atypical observations. Most of models also identify the period 1995:1-2008:4 as a very long and stable period of moderate-high growth rates. From the perspective of the Peruvian economic history and from a statistical point of view, the MSIAH(3) model is the preferred model. Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2010 Pages: 1-25 Volume: 2010 Issue: 2 Handle: RePEc:oec:stdkab:5KM33SFV0XXN Template-type: ReDIF-Article 1.0 Author-Name: Carlos Bowles Author-Name: Roberta Friz Author-Name: Veronique Genre Author-Name: Geoff Kenny Author-Name: Aidan Meyler Author-Name: Tuomas Rautanen Title: An Evaluation of the Growth and Unemployment Forecasts in the ECB Survey of Professional Forecasters Abstract: In this paper we provide a comprehensive evaluation of the euro area GDP growth and unemployment rate forecasts collected in the quarterly ECB Survey of Professional Forecasters (SPF) over the period 1999Q1–2008Q4. Our results suggest that while SPF forecasts generally appear to be slightly superior to naïve and purely backwardlooking benchmarks, forecast errors nonetheless exhibit a high degree of persistence. In addition, our analysis of the heterogeneity across individual SPF replies suggests that the broad pattern of the individual forecasts is essentially the same as that of the aggregate SPF results. This may refl ect a high degree of commonality in the information available (and not available) to panel members, thus leading them to “get it wrong” (or right) not only in the aggregate, but also individually. In particular, although a small number of forecasters perform substantially above average for some variables and horizons, none does so systematically for all variables and all horizons. Lastly, we have presented and assessed the information about forecast uncertainty provided by the SPF. In line with other studies based on the US SPF, disagreement among panel members does not appear to be a good proxy for overall macroeconomic uncertainty, i.e ., a high degree of consensus is not necessarily an indication of a low level of forecast uncertainty. Our analysis also suggests that, at the individual level, panel members may not fully internalise the overall level of macroeconomic uncertainty. For example, compared with the level of uncertainty indicated by the historical volatility of actual GDP growth and the unemployment rate, the perceptions of individual panel members about uncertainty appear quite low. This possible underestimation of overall uncertainty is much less severe when densities are aggregated across forecasters. Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2010 Pages: 1-28 Volume: 2010 Issue: 2 Handle: RePEc:oec:stdkab:5KM33SG210KK Template-type: ReDIF-Article 1.0 Author-Name: Matteo M. Pelagatti Author-Name: Valeria Negri Title: The Industrial Cycle of Milan as an Accurate Leading Indicator for the Italian Business Cycle Abstract: A coincident business cycle indicator for the Milan area is built on the basis of a monthly industrial survey carried out by Assolombarda, the largest territorial entrepreneurial association in Italy. The indicator is extracted from three time series concerning the production level and the domestic and foreign order book as declared by some 250 Assolombarda associates. Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2010 Pages: 1-17 Volume: 2010 Issue: 2 Handle: RePEc:oec:stdkab:5KM37FT4ZRNS Template-type: ReDIF-Article 1.0 Author-Name: Helmut Lütkepohl Title: Forecasting Aggregated Time Series Variables: A Survey Abstract: Aggregated times series variables can be forecasted in different ways. For example, they may be forecasted on the basis of the aggregate series or forecasts of disaggregated variables may be obtained fi rst and then these forecasts may be aggregated. A number of forecasts are presented and compared. Classical theoretical results on the relative effi ciencies of different forecasts are reviewed and some complications are discussed which invalidate the theoretical results. Contemporaneous as well as temporal aggregation are considered. JEL classifi cation : C22, C32 Key Words : Autoregressive moving-average process, contemporaneous aggregation, temporal aggregation, vector autoregressive moving-average process Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2010 Pages: 1-26 Volume: 2010 Issue: 2 Handle: RePEc:oec:stdkab:5KM399R2JZ9N Template-type: ReDIF-Article 1.0 Author-Name: Klaus Abberger Author-Email: abberger@ifo.de Author-Name: Wolfgang Nierhaus Title: Markov-Switching and the Ifo Business Climate: the Ifo Business Cycle Traffic Lights Abstract: Business cycle indicators are used to assess the economic situation of countries or regions. They are closely watched by the public, but are not easy to interpret. Does a current movement of the indicator signal a turning point or not? With the help of Markov Switching Models movements of indicators can be transformed in probability statements. In this article, the most important leading indicator of the German business cycle, the Ifo Business Climate, is described by a Markov Switching Model. Real-time probabilities for the current business-cycle regime are derived and presented in an innovative way: as the Ifo traffi c lights. JEL Classifi cation: E32, C22 Keywords: Ifo business climate, growth cycle, turning points, Markov-switching Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2010 Pages: 1-13 Volume: 2010 Issue: 2 Handle: RePEc:oec:stdkab:5KM4GZQTX248 Template-type: ReDIF-Article 1.0 Author-Name: Christiaan Heij Author-Name: Dick van Dijk Author-Name: Patrick J.F. Groenen Title: Forecasting with Leading Indicators by means of the Principal Covariate Index Abstract: A new method of leading index construction is proposed, which explicitly takes into account the purpose of using the index for forecasting a coincident economic indicator. This so-called principal covariate index combines the need for compressing the information in a large number of individual leading indicator variables with the objective of forecasting. In an empirical application to forecast future growth rates of the Conference Board’s Composite Coincident Index and its constituents, the forecasts of the principal covariate index are more accurate than those obtained either from the Composite Leading Index of the Conference Board or from an alternative index-based on principal components. JEL Classification: C32, C53, E27 Keywords: index construction, business cycles, principal component, principal covariate, time series forecasting, variable selection Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2011 Pages: 73-92 Volume: 2011 Issue: 1 Handle: RePEc:oec:stdkab:5KGDWLPZS79V Template-type: ReDIF-Article 1.0 Author-Name: David R. F. Love Title: Aggregate Comovements, Anticipation, and Business Cycles Abstract: This paper shows that negative comovements between major macroeconomic variables at business-cycle frequencies are commonly observed, but that standard Real Business Cycle (RBC) theory fails to predict this feature of the data. We show that allowing for “anticipation effects” in response to “news shocks” enables standard RBC models to predict both the observed patterns of negative comovement and overall positive correlations. Anticipation also improves magnification of shocks in the model without harming predictions for the other second moments central to RBC studies. Anticipation effects improve on standard RBC frameworks by offering an empirically plausible explanation for the nontrivial fraction of time that aggregate variables are observed to comove negatively. Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2011 Pages: 93-110 Volume: 2011 Issue: 1 Handle: RePEc:oec:stdkab:5KGG5K4PLKZS Template-type: ReDIF-Article 1.0 Author-Name: Ferdinand Fichtner Author-Name: Rasmus Rüffer Author-Name: Bernd Schnatz Title: The Forecasting Performance of Composite Leading Indicators: Does Globalisation Matter? Abstract: Using OECD Composite Leading Indicators (CLI), we assess empirically whether the ability of the country-specific CLIs to predict economic activity has diminished in recent years, e.g. due to rapid advances in globalisation. Overall, we find evidence that the CLI encompasses useful information for forecasting industrial production, particularly over horizons of four to eight months ahead. The evidence is particularly strong when taking cointegration relationships into account. At the same time, we find indications that the forecast accuracy has declined over time for several countries. Augmenting the country-specific CLI with a leading indicator of the external environment and employing forecast combination techniques improves the forecast performance for several economies. Over time, the increasing importance of international dependencies is documented by relative performance gains of the extended model for selected countries. Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2011 Pages: 55-72 Volume: 2011 Issue: 1 Handle: RePEc:oec:stdkab:5KGG5K4ZB49W Template-type: ReDIF-Article 1.0 Author-Name: Rolf Scheufele Title: Are Qualitative Inflation Expectations Useful to Predict Inflation? Abstract: This paper examines the properties of qualitative inflation expectations collected from economic experts for Germany. It describes their characteristics relating to rationality and Granger causality. An out-of-sample simulation study investigates whether this indicator is suitable for inflation forecasting. Results from other standard forecasting models are considered and compared with models employing survey measures. We find that a model using survey expectations outperforms most of the competing models. Moreover, we find some evidence that the survey indicator already contains information from other model types (e.g. Phillips curve models). However, the forecast quality may be further improved by completely taking into account information from some financial indicators. Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2011 Pages: 29-53 Volume: 2011 Issue: 1 Handle: RePEc:oec:stdkab:5KGG5K52XB5C Template-type: ReDIF-Article 1.0 Author-Name: Ece Oral Author-Name: Hülya Saygili Author-Name: Mesut Saygili Author-Name: S. Özge Tuncel Title: Inflation Expectations in Turkey: Evidence from Panel Data Abstract: We investigated the rationality of financial and real sectors’ CPI inflation expectations in Turkey using the multivariate panel cointegration method. The use of panel techniques strengthened our empirical results by not only increasing sample size but also allowing heterogeneity across groups of respondents. Having found the expectations irrational in the stricter sense, we proceeded to analyze the significance of both past and future inflation rates as determinants of agents’ future inflation forecasts. Both recursive and rolling estimates show that forecasters’ weight on future/target inflation rates versus past actual and expected inflation rates changes over time as unexpected shocks derail inflation from its disinflationary path. Lastly, we find asymmetry in expectations such that the response of inflation expectations to an increase in the inflation rate is twice the size of the response to a decrease in the inflation rate. This may indicate long delays in restoring credibility of central banks after a positive shock on the inflation rate. JEL Classifications: C23, D84, E31 Keywords: Inflation expectations, Inflation formation, Panel cointegration, Recursive regression Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2011 Pages: 5-28 Volume: 2011 Issue: 1 Handle: RePEc:oec:stdkab:5KGG5K53NP7C Template-type: ReDIF-Article 1.0 Author-Name: Andrew Hughes Hallett Author-Name: Christian R. Richter Title: Are the New Member States Converging on the Euro Area?: A Business Cycle Analysis for Economies in Transition Abstract: The Optimal Currency Area theory stresses the importance of co-movement of the business cycles of member states in order for the common currency to be successful. Yet, the identification of (European) business cycles has been inconclusive and is complicated by the enlargement to the new member states in 2004 and their transition to market economies. In this paper, we show how to decompose a business cycle into a time-frequency framework in a way that allows us to compare the growth rate spectra and coherences for the Hungarian, Polish, Czech, German and French economies. We find that, since joining the EU, there has been convergence on the euro area economy at short cycle lengths, but little convergence in long cycles. We argue that this shows evidence of nominal convergence, but little real convergence. The standard Maastricht convergence criteria for membership of the euro therefore need to be adapted to test for real convergence. JEL Classification: C22, C29, C49, F43, O49 Keywords: Time-Frequency Analysis, Coherence, Growth Rates, Business Cycles Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2012 Pages: 49-68 Volume: 2011 Issue: 2 Handle: RePEc:oec:stdkab:5KG0NVZLQKF0 Template-type: ReDIF-Article 1.0 Author-Name: Jelena Radovic-Stojanovic Title: A Cyclical Analysis of Economic Activity in Serbia Abstract: The paper presents the results of the first application of cyclical analysis to economic activity in Serbia. The analysis refers to the period 2001-07, which marked the start of democratic and economic reforms, since short term fluctuations in economic activity prior to 2001 were the result of various exogenous shocks like hyperinflation, wars and international economic sanctions. In the post-reform period, the Serbian economy exhibits characteristics of a small, open, marketoriented economy. Economic activity shows an upward trend, and with special regard to growth dynamics and their cyclical properties, cyclical analysis is relevant. In analysing cyclical fluctuations in economic activity, a deviation-from-trend approach is applied. For dating turning points in economic activity, the monthly gross domestic product (GDP) is used since the coincident properties of the index of industrial production could not be statistically verified for Serbia as there were a small number of quarterly observations available for GDP. Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2012 Pages: 5-28 Volume: 2011 Issue: 2 Handle: RePEc:oec:stdkab:5KG0NVZLTM48 Template-type: ReDIF-Article 1.0 Author-Name: Torsten Schmidt Author-Name: Tobias Zimmermann Title: Energy Prices and Business Cycles: Lessons from a Simulated Small Open Economy Model Abstract: Despite energy price hikes in recent years, growth rates turned out to be high in most industrialised countries. This pattern starkly contrasts the adverse effects that energy price shocks exerted on growth in the 1970s and 1980s. This study investigates whether a reduction in the energy cost share or different sources of energy price hikes are responsible for this divergence. By adding an exogenous twovariable VAR to a new open economy model for Germany, both energy prices and global economic activity are specified to be independent from domestic variables but assumed to influence each other. We show that it is sensible to calibrate the model in accordance with long-run fluctuations in important, observable, structural parameters and VAR coefficients on a period by period basis. Increases in energy prices and in global output serve as supply side and demand side shocks respectively. Our results suggest that the effects of recent energy price hikes have been different from past experiences because they were demand driven. Therefore, supply driven energy price increases could still be an important source of business cycle fluctuations. JEL Classifications: E31, E32, F41 Keywords: Oil prices, new Keynesian open economy model Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2012 Pages: 29-47 Volume: 2011 Issue: 2 Handle: RePEc:oec:stdkab:5KG0NVZMGFD5 Template-type: ReDIF-Article 1.0 Author-Name: Cristina Conflitti Author-Email: cconflit@ulb.ac.be Title: Measuring Uncertainty and Disagreement in the European Survey of Professional Forecasters Abstract: Survey data on expectations and economic forecasts play an important role in providing better insights into how economic agents make their own forecasts and why agents disagree in making them. Using data from the European Survey of Professional Forecasters (SPF), we consider measures of uncertainty and disagreement at both aggregate and individual level. We overcome the problem associated with distributional assumptions of probability density forecasts by using an approach that does not assume any functional form for the individual probability densities but just approximates the histogram by a piecewise linear function. We extend earlier works to the European context for the three macroeconomic variables – GDP, inflation and unemployment – and we analyse how these measures perform with respect to different forecasting horizons. There are two main results. First, uncertainty and disagreement are higher for GDP and unemployment than inflation, in particular for the short and medium forecast horizons. Second, the results do not support the evidence that, if uncertainty or disagreement are relatively high for one variable, then it is the same for the others. JEL classification: C53, E37, C83. Keywords: Survey professional forecast, uncertainty, disagreement, probability distribution. Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2012 Pages: 69-103 Volume: 2011 Issue: 2 Handle: RePEc:oec:stdkab:5KG0P9ZZP26K Template-type: ReDIF-Article 1.0 Author-Name: Hiroshi Yamada Author-Email: yamada@hiroshima-u.ac.jp Title: A Note on Band-Pass Filters Based on the Hodrick-Prescott Filter and the OECD System of Composite Leading Indicators Abstract: The Organisation for Economic Co-operation and Development (OECD) began to use a band-pass filter, based on the Hodrick-Prescott filter (HPband-pass filter), to calculate the composite leading indicators (CLIs) in December2008. Other than the filter adopted by the OECD, there is an alternative HPband-pass filter. This note examines whether the application of these two alternative HPband-pass filters in the calculations of the OECD’s CLIs lead to negligible differences. JEL Classification: E32; C22 Keywords: Hodrick-Prescott band-pass filter; Composite leading indicators.© beawolf - Fotolia.com Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2012 Pages: 105-109 Volume: 2011 Issue: 2 Handle: RePEc:oec:stdkab:5KG0PB01SBBT Template-type: ReDIF-Article 1.0 Author-Name: Sandra Bilek-Steindl Title: On the Change in the Austrian Business Cycle Abstract: This paper analyses the change in the Austrian business cycle over time using data back to 1954. The change in the cyclical pattern is captured using a non-linear univariate structural time series model where the time of the break point is estimated. Results for GDP series suggest a break in the frequency of the cycle and in the parameter covering the variance of the disturbances of the cycle taking place in the mid 1970s and early 1980s, respectively. Using data for GDP components a break in these variables is found too, but the timing of the break differs among the series. In a further step the paper assesses the relevance of these findings for forecasting purposes. It is shown that during certain periods the out-of-sample forecasting performance of GDP does improve when a break in one of the two parameters is explicitly modelled. Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2012 Pages: 1-18 Volume: 2012 Issue: 1 Handle: RePEc:oec:stdkab:5K9159FNZ8KG Template-type: ReDIF-Article 1.0 Author-Name: Patrick M. Crowley Author-Email: patrick.crowley@tamucc.edu Author-Name: Tony Schildt Title: An Analysis of the Embedded Frequency Content of Macroeconomic Indicators and their Counterparts using the Hilbert-Huang Transform Abstract: Many indicators of business and growth cycles have been constructed by both private and public agencies and are now in use as monitoring devices of economic conditions and for forecasting purposes. As these indicators are largely composite constructs using other economic data, their frequency composition is likely different to that of the variables that they are used as for indicators. Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2012 Pages: 1-31 Volume: 2012 Issue: 1 Handle: RePEc:oec:stdkab:5K92SNJZSNNR Template-type: ReDIF-Article 1.0 Author-Name: Horst Entorf Author-Name: Christian Knoll Author-Name: Liliya Sattarova Title: Measuring confidence and uncertainty during the financial crisis: Evidence from the CFS Survey. Report Abstract: The CFS survey covers individual situations of banks and other companies of the financial sector. This provides a rare opportunity to analyse appraisals, expectations and forecast errors of the core sector of the recent financial crisis. Following standard ways of aggregating individual survey data, we first present and introduce the CFS survey by comparing CFS indicators of confidence and predicted confidence to Ifo and ZEW indicators. The major contribution is the analysis of several indicators of uncertainty. In addition to well-established concepts, we introduce innovative measures based on the skewness of forecast errors and on the share of “no response” replies. Results show that uncertainty indicators fit quite well with patterns of real and financial time series of the time period 2007 to 2010. [REPORT] Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2012 Pages: 1-16 Volume: 2012 Issue: 1 Handle: RePEc:oec:stdkab:5K976T5XL0F1 Template-type: ReDIF-Article 1.0 Author-Name: Atilim Seymen Title: Euro area business cycles Abstract: The role of global, euro area and country-specific shocks in business cycle dynamics of six euro area member countries is assessed with the aid of SVAR models. Output fluctuations are driven by global shocks to a large extent in the euro area, and no Europeanisation of business cycles due to, for example the European Monetary Union, could be established. Business cycle heterogeneity is driven mainly by (asymmetric) country-specific shocks in the euro area and not by heterogeneous responses to common, particularly global, shocks. The cyclical disparity across the member economies is found to be small relative to the size of business cycles. JEL classification: E32, C32, F00 Keywords: European Monetary Union, international business cycles, common and country-specific shocks, structural vector autoregression Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2012 Pages: 1-31 Volume: 2012 Issue: 1 Handle: RePEc:oec:stdkab:5K98XGF7DNWK Template-type: ReDIF-Article 1.0 Author-Name: Kajal Lahiri Author-Name: Wenxiong Yao Title: Should transportation output be included as part of the coincident indicators system? Abstract: With the increasing importance of the service-providing sectors, information from these sectors has become essential to the understanding of contemporary business cycles. This paper explores the usefulness of the transportation services output index (TSI) as an additional coincident indicator in determining the peaks and troughs of US economy. The index represents a service sector that plays a central role in facilitating economic activities between sectors and across regions, and can be useful in monitoring the current state of the economy. We evaluate the marginal contribution of the TSI in identifying cyclical turning points in the context of four currently used NBER indicators. The TSI is found to have advantages over the composite index of coincident indicators in identifying turning points, and has been of critical importance in recent recessions. Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2012 Pages: 1-24 Volume: 2012 Issue: 1 Handle: RePEc:oec:stdkab:5K9BDTJZJ45J Template-type: ReDIF-Article 1.0 Author-Name: João Victor Issler Author-Email: JISSLER@fgv.br Author-Name: Hilton Hostalacio Notini Author-Email: hiltinhonotini@yahoo.com.br Author-Name: Claudia Fontoura Rodrigues Author-Email: claudia_fontoura@yahoo.com Title: Constructing coincident and leading indices of economic activity for the Brazilian economy Abstract: This paper has three original contributions. The first is the reconstruction effort of the series of employment and income to allow the creation of a new coincident index for the Brazilian economic activity. The second is the construction of a coincident index of the economic activity for Brazil, and from it, (re) establish a chronology of recessions in the recent past of the Brazilian economy. The coincident index follows the methodology proposed by The Conference Board (TCB) and it covers the period 1980:1 to 2007:11. The third is the construction and evaluation of many leading indicators of economic activity for Brazil which fills an important gap in the Brazilian Business-Cycle literature. Keywords: Coincident and Leading Indicators, Business Cycles, Common Features, Latent Factor Analysis JEL codes: C32, E32 Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2013 Pages: 43-65 Volume: 2012 Issue: 2 Handle: RePEc:oec:stdkab:5K4841782XNN Template-type: ReDIF-Article 1.0 Author-Name: Sadullah Çelik Author-Name: Hüseyin Kaya Title: Day-of-the-week effect in Consumer Confidence Index: The case of Turkey Abstract: The aim of this study is to examine the validity of the day-of-the-week effect on both mean and volatility for changes in Consumer Confidence Index in Turkey. To the best of our knowledge, there is no previous study on this topic for an emerging market. Employing the E-GARCH method, we are able to validate day-of-the-week effect both in mean and volatility of the daily changes in the Consumer Confidence Index. In our findings, the mean equation exhibits only a Friday effect and the lowest volatility is also observed for Friday. Additionally, we use nonparametric stochastic dominance (SD) approach by employing several SD tests and verify the existence of Friday effects. Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C14; C32; D11; D12 Year: 2013 Pages: 33-42 Volume: 2012 Issue: 2 Handle: RePEc:oec:stdkab:5K49J33NQDG5 Template-type: ReDIF-Article 1.0 Author-Name: Ivan Savin Author-Email: ivan.savin@uni-jena.de Author-Name: Peter Winker Title: Heuristic model selection for leading indicators in Russia and Germany Abstract: Business tendency survey indicators are widely recognised as a key instrument for business cycle forecasting. Their leading indicator property is assessed with regard to forecasting industrial production in Russia and Germany. For this purpose, vector autoregressive (VAR) models are specified and estimated to construct forecasts. As the potential number of lags included is large, we compare full-specified VAR models with subset models obtained using a Genetic Algorithm enabling “holes” in multivariate lag structures. The problem is complicated by the fact that a structural break and seasonal variation of indicators have to be taken into account. The models allow for a comparison of the dynamic adjustment and the forecasting performance of the leading indicators for both countries revealing marked differences between Russia and Germany. JEL classification: C52, C61, E37 Keywords: Leading indicators, business cycle forecasts, VAR, model selection, genetic algorithms Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2013 Pages: 67-89 Volume: 2012 Issue: 2 Handle: RePEc:oec:stdkab:5K49PKPBF76J Template-type: ReDIF-Article 1.0 Author-Name: Marco Malgarini Author-Email: m.malgarini@isae.it Author-Name: Antonio Paradiso Title: Measuring capacity utilisation in the italian manufacturing sector: a comparison between time series and survey estimates Abstract: The aim of this paper is to provide an interpretation of the measure of capacity utilisation provided by the European Union harmonised survey on the Italian manufacturing sector. In doing so, we evaluate its ability to correctly track cyclical turning points and its contribution in explaining consumer price index (CPI) inflation. The survey based measure results are a good co-incident indicator of business cycle, however it is generally outperformed by time series models in explaining inflation. We conclude that the standard “output gap” interpretation of the survey results is broadly confirmed by the data, however we cannot rule out at this stage that survey respondents may also consider the alternative “variable capacity utilisation” concept in answering the survey question. Keywords: Capacity utilisation, co-integration, unobserved component models, VAR.JEL Classification: E32, C22, E37 Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2012 Pages: 5-19 Volume: 2012 Issue: 2 Handle: RePEc:oec:stdkab:5K8ZNWP2NTS8 Template-type: ReDIF-Article 1.0 Author-Name: Antonello D'Agostino Author-Email: antonello.dagostino@ecb.int Author-Name: Kieran McQuinn Author-Name: Derry O’Brien Title: Nowcasting Irish GDP Abstract: This paper presents a dynamic factor model that produces nowcasts and backcasts of Irish quarterly GDP using timely data from a panel dataset of 35 indicators. We apply a recently developed methodology, whereby numerous potentially useful indicator series for Irish GDP can be availed of in a parsimonious manner and the unsynchronised nature of the release calendar for a wide range of higher frequency indicators can be handled. The nowcasts in this paper are generated by using dynamic factor analysis to extract common factors from the panel dataset. Bridge equations are then used to relate these factors to quarterly GDP estimates. We conduct an out-of-sample forecasting simulation exercise, where the results of the nowcasting exercise are compared with those of a standard benchmark model. Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2012 Pages: 21-31 Volume: 2012 Issue: 2 Handle: RePEc:oec:stdkab:5K92N2PWCCWB Template-type: ReDIF-Article 1.0 Author-Name: Periklis Gogas Title: Business cycle synchronisation in the European Union: The effect of the common currency Abstract: In this paper, I analyse the synchronisation of business cycles within the European Union (EU), as this is an important ingredient for the implementation of a successful monetary policy. The business cycles of twelve EU countries and two sub-groups of countries are extracted for the period 1989Q1-2010Q2. The cycle of G3, the group of the three largest European economies (Germany, France and Italy) is then used as a benchmark series for the comparisons. The sensitivity of the data to alternative cycle extraction methodologies is explored employing the Hodrick-Prescott and Baxter-King filters using alternative parameter specifications and leads/lags. The strength of cycle synchronisation is measured using linear regressions, crosscorrelation coefficients and the Cycle Synchronisation Index (CSI). To assess whether synchronisation is stronger after the introduction of the common currency, we also test two sub-samples pre- and post-EMU (1999Q1). The empirical results provide evidence that cycle synchronisation within the euro area has become stronger in the common currency period. Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: E32; E42; E52 Year: 2013 Pages: 1-14 Volume: 2013 Issue: 1 Handle: RePEc:oec:stdkab:5K43JT540LZS Template-type: ReDIF-Article 1.0 Author-Name: Vitor Castro Title: The Portuguese stock market cycle: Chronology and duration dependence Abstract: This paper tries to identify, for the first time, a chronology for the Portuguese stock market cycle and test for the presence of duration dependence in bull and bear markets. A duration-dependent Markov-switching model is estimated over monthly growth rates of the Portuguese stock index for the period January 1989 to April 2012. Six episodes of bull/bear markets are identified during that period, as well as the presence of positive duration dependence in bear but not in bull markets. Keywords: bull and bear markets, duration dependence, Markov-switching, Stock market cycles Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C24; C41; E32; G19 Year: 2013 Pages: 1-23 Volume: 2013 Issue: 1 Handle: RePEc:oec:stdkab:5K455RTZV69Q Template-type: ReDIF-Article 1.0 Author-Name: Burkhard Heer Title: A note on the cyclical behaviour of the income distribution Abstract: Empirically, the income share is procyclical for the low-income groups and acyclical for the top 5%. To generate this kind of behaviour in a DGE business cycle model, we consider overlapping generations and elastic labour supply in addition to those elements considered by Castañeda et al. (1998). We also analyse a model with rigid wages. However, these features do not help to constitute a major improvement vis-a-vis their model. JEL classification: C68, D31, E32 Keywords: Income distribution, business cycle, overlapping generations, unemployment, pensions Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2013 Pages: 1-7 Volume: 2013 Issue: 1 Handle: RePEc:oec:stdkab:5K483456BLBR Template-type: ReDIF-Article 1.0 Author-Name: Michael Pedersen Title: Extracting GDP signals from the monthly indicator of economic activity: Evidence from Chilean real-time data Abstract: Real-time data are analysed for information on the Chilean monthly economic activity indicator IMACEC and what it indicates of the final GDP, defined as the growth rate that has been subject to at least two annual revisions. Data are presented and revisions analysed briefly. Mincer-Zarnowitz tests suggest that forecast rationality is rejected with respect to the three-month IMACEC growth rate as a nowcast of the first released quarterly GDP, as well as the first published GDP as a nowcast of the final GDP. An out-of-sample nowcasting analysis was conducted using only data which were available in real-time. The results show that small models nowcast better than less parsimonious ones. The evidence from the empirical study suggests no improvement in the nowcasting performance when historical data are supplemented with the first monthly IMACEC of the quarter. On the other hand, when two monthly observations IMACEC are available, the root mean squared nowcast error (RMSNE) decreases by 24%, and a further decline of 33% is obtained when the third monthly observation of the quarter is published. Both of these advances are statistically significant. No further improvement is obtained with the publication of the first release of the quarterly GDP. JEL classifications: C89, E17 Keywords: Real-time data, data revisions, nowcasting Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2013 Pages: 1-16 Volume: 2013 Issue: 1 Handle: RePEc:oec:stdkab:5K48345B3LKC Template-type: ReDIF-Article 1.0 Author-Name: Hélène Erkel-Rousse Author-Email: Helene.ERKEL-ROUSSE@dgtresor.gouv.fr Author-Workplace-Name: Direction générale du Trésor, Ministère de l'Économie et des Finances Author-Name: Michael Graff Author-Email: graffM@rbnz.govt.nz Author-Workplace-Name: Centre for International Research on Economic Tendency Surveys Title: General introduction: Short-term forecasting methods joint issue with Économie et Prévision Abstract: Short-term forecasting methods joint issue with Économie et PrévisionThis issue is a special issue in two respects. First, all contributions deal with shortterm forecasting methods. Second and above all, this special issue results from an original and fruitful collaboration between two scientific journals: Économie et Prévision and the Journal of Business Cycle Measurement and Analysis (JBCMA). Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2014 Pages: 5-10 Volume: 2013 Issue: 2 Handle: RePEc:oec:stdkab:5JZ40RTC648W Template-type: ReDIF-Article 1.0 Author-Name: Karim Barhoumi Author-Name: Olivier Darné Author-Name: Laurent Ferrara Author-Email: lferrara@ccip.fr Title: Dynamic factor models: A review of the literature Abstract: In the last few years, the growth in the amount of economic and financial data available has prompted econometricians to develop or adapt new methods enabling them to summarise efficiently the information contained in large databases. Of these methods, dynamic factor models have seen rapid growth and become very popular among macroeconomists. In this paper, we carry out a survey of recent literature on dynamic factor models. We start by presenting the models used before looking at parameter estimation methods and statistical tests available for choosing the number of factors. We then focus on recent empirical applications dealing with the construction of economic outlook indicators, macroeconomic forecasts, and both macroeconomic and monetary policy analyses. Keywords: Dynamic factor models, estimation, tests for the number of factors, macroeconomic applications Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C13; C32; C51; E66; F44 Year: 2014 Pages: 73-107 Volume: 2013 Issue: 2 Handle: RePEc:oec:stdkab:5JZ417F7B7NV Template-type: ReDIF-Article 1.0 Author-Name: Matthieu Cornec Author-Email: matthieu.cornec@insee.fr Author-Workplace-Name: Institut national de la statistique et des études économiques Title: Constructing a conditional GDP fan chart with an application to French business survey data Abstract: Interval confidence and density forecasts, notably in the form of “fan charts”, are useful tools to describe the uncertainty inherent to any point forecast. However, the existing techniques suffer from several drawbacks. We propose a new method to represent uncertainty in realtime that is conditional upon the economic outlook, non-parametric and reproducible. Moreover, we build a Forecasting Risk Index associated with our fan chart to measure the intrinsic difficulty of the forecasting exercise. Using balances of opinion of different business surveys carried out by the French statistical institute INSEE, our GDP fan chart efficiently captures the growth stall during the crisis on a real-time basis. Our Forecasting Risk Index has increased substantially in this period of turbulence, showing signs of growing uncertainty. Keywords: Density forecast, quantile regressions, business tendency surveys, fan charts JEL classification: E32, E37, E66, C22 Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C22; E32; E37; E66 Year: 2014 Pages: 109-127 Volume: 2013 Issue: 2 Handle: RePEc:oec:stdkab:5JZ417XZW931 Template-type: ReDIF-Article 1.0 Author-Name: Troy D. Matheson Title: New indicators for tracking growth in real time Abstract: We develop monthly indicators for tracking short-run trends in real GDP growth in 32 advanced and emerging-market economies. We test the historical performance of our indicators and find that they do a good job at describing the business cycle. In a recursive out-of-sample forecasting exercise, we find that the indicators generally produce good real GDP growth forecasts relative to a range of time series models. Keywords: Nowcasting, short-term forecasting, real-time data Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C51; C53; E17 Year: 2014 Pages: 51-71 Volume: 2013 Issue: 2 Handle: RePEc:oec:stdkab:5JZ741MH2CZS Template-type: ReDIF-Article 1.0 Author-Name: Marie Bessec Author-Name: Catherine Doz Title: Short-term forecasting of French GDP growth using dynamic factor models Abstract: In recent years, central banks and international organisations have been making ever greater use of factor models to forecast macroeconomic variables. We examine the performance of these models in forecasting French GDP growth over short horizons. The factors are extracted from a large data set of around one hundred variables including survey balances and real, financial, and international variables. An out-of-sample pseudo real-time evaluation over the past decade shows that factor models provide a gain in accuracy relative to the usual benchmarks. However, the forecasts remain inaccurate before the start of the quarter. We also show that the inclusion of international and financial variables can improve forecasts at the longest horizons. Keywords: GDP forecast, factor models Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C22; E32; E37 Year: 2014 Pages: 11-50 Volume: 2013 Issue: 2 Handle: RePEc:oec:stdkab:5JZ742L0PT8S Template-type: ReDIF-Article 1.0 Author-Name: Boriss Siliverstovs Author-Email: siliverstovs@kof.ethz.ch Title: Do business tendency surveys help in forecasting employment?: A real-time evidence for Switzerland Abstract: This study investigates the usefulness of business tendency surveys collected at the KOF Swiss Economic Institute and aggregated in the form of the KOF Employment Indicator for short-term forecasting of employment in Switzerland. We use a real-time dataset in order to simulate the actual predictive process using only information that was available at the time when predictions were made. We evaluate the predictive content of the KOF Employment Indicator both for nowcasts that are published two months before the first official release, and for one-quarter ahead forecasts published five months before the first official release. We find that inclusion of the KOF Employment Indicator leads to a substantial improvement in prediction accuracy of both point and density forecasts compared to the performance of a benchmark autoregressive model. Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C11; C22; C53; E24 Year: 2013 Pages: 129-151 Volume: 2013 Issue: 2 Handle: RePEc:oec:stdkab:5K4BXLXJKD32 Template-type: ReDIF-Article 1.0 Author-Name: Sumru Altug Author-Name: Erhan Uluceviz Title: Identifying leading indicators of real activity and inflation for Turkey, 1988-2010: A pseudo out-of-sample forecasting approach Abstract: This paper develops a set of leading indicators for industrial production growth and changes in consumer price inflation by accounting for changes in the policy regime that have occurred for the Turkish economy over the sample period 1988-2010. The choice of indicators is based on a pseudo out-of-sample forecasting exercise that is implemented by Leigh and Rossi (2002), and Stock and Watson (2003), amongst others. Our findings provide evidence on the factors determining changes in real activity and inflation over an extended sample period that encompasses episodes of volatile inflation and output growth as well as the recent experience of disinflation and normalisation for the Turkish economy. Keywords: Real activity, inflation, leading indicators, out-of-sample forecasting, combination forecasts, inflation targeting, Turkey. JEL classification: E1, E32, E37, E58, F43, O52 Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2013 Pages: 1-37 Volume: 2014 Issue: 1 Handle: RePEc:oec:stdkab:5K4221J86N8V Template-type: ReDIF-Article 1.0 Author-Name: Peter Martey Addo Author-Name: Monica Billio Author-Email: billio@unive.it Author-Name: Dominique Guégan Author-Email: guegan@ecogest.ens-gachan.fr Title: Turning point chronology for the euro area: A distance plot approach Abstract: We propose a transparent way of establishing a turning point chronology for the euro area business cycle. Our analysis is achieved by exploiting the concept of recurrence plots, in particular distance plots, to characterise and detect turning points of the business cycle. Firstly, we apply the concept of recurrence plots on the US Industrial Production Index (IPI) series; this serves as a benchmark for our analysis since it already contains a reference chronology for the US business cycle, as provided by the Dating Committee of the National Bureau of Economic Research (NBER). We then use this concept to construct a turning point chronology for the euro area business cycle. In particular, we show that this approach detects turning points and helps with the study of the business cycle without a priori assumptions on the statistical properties of the underlying economic indicator. Keywords: economic cycles; euro area; recurrence plots; turning points JEL classification: C14, C40, E32 Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C14; C40; E32 Year: 2014 Pages: 1-14 Volume: 2014 Issue: 1 Handle: RePEc:oec:stdkab:5JXWZ80D73Q8 Template-type: ReDIF-Article 1.0 Author-Name: Sergey V. Smirnov Title: Russian cyclical indicators and their usefulness in real time. (Report): An experience of the 2008-09 recession Abstract: This report investigates the predictability of cyclical turning points in Russia. For years, anyone interested in Russia had access to a full set of common tools for business cycle analysis, such as several composite leading indicators, a purchasing managers’ index, enterprise and consumer sentiment indexes, and so on. However, the 2008-09 world financial crisis spread throughout Russia quite unexpectedly for most politicians, businessmen and experts alike. Is it possible that none of existing indexes were able to say anything about the approaching decline? Using a simple “rule of thumb” proposed in this report one may easily see that that in reality this was not the case. So then why did a more or less definite forecast provided by some indexes have no consequences for common economic sentiments in Russia? This report gives some answers to this question. Keywords: recession; growth cycles; cyclical indicators; leading indicators; turning points; Russia JEL classification: E32 Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: E32 Year: 2014 Pages: 1-26 Volume: 2014 Issue: 1 Handle: RePEc:oec:stdkab:5JXX568WCFHD Template-type: ReDIF-Article 1.0 Author-Name: Marco Gallegati Title: Making leading indicators more leading: A wavelet-based method for the construction of composite leading indexes Abstract: This paper proposes a novel wavelet-based approach for constructing composite indicators. The wavelet-based methodology exploits the ability of wavelet analysis to analyse the relationships between variables on a scale-by-scale, rather than aggregate, basis. A wavelet-based index which combines several scale-based subindexes is constructed by using a scale-by-scale selection of the components included in the OECD composite leading indicator (CLI) for the US. The comparison with the CLI and its derived measures indicate that the wavelet-based composite index tends to provide early signals of business cycle turning points well in advance of the OECD CLI. Moreover we find that the reliability of the signals tends to increase considerably when the sub-index obtained from the time scale components corresponding to minor cycles, that is, 2-4 years, is removed from the overall wavelet-based index. Keywords: wavelets; composite leading indicators; early warning signals JEL classification: C1; C3; C5; E3 Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C1; C3; C5; E3 Year: 2014 Pages: 1-21 Volume: 2014 Issue: 1 Handle: RePEc:oec:stdkab:5JXX56GQMHF1 Template-type: ReDIF-Article 1.0 Author-Name: Ekaterini Tsouma Title: Dating business cycle turning points: The Greek economy during 1970-2012 and the recent recession Abstract: This paper establishes a reference chronology for the Greek business cycle from early 1970 to late 2012, against the backdrop of the late 2000s global recession and the most recent domestic economic developments, which once again stress the significance of dating business cycle turning points. The derivation of the exact dates of switches between expansions and recessions allows the identification of the point in time at which the Greek economy entered the recent recessionary business cycle regime in the late 2000s and the verification of the assertion that, up to the end of 2012, it had not yet exited the recession. We rely on both non-parametric and parametric procedures in order to check the coherence among the obtained turning points and evaluate the establishment of a reference chronology. We use quarterly GDP data and selected monthly indicators covering important sectors and activities in the Greek economy. On the basis of the obtained exact turning point dates and the indications provided by several business cycle and phases characteristics, we are able to propose a reference chronology for Greece and outline stylised facts of the Greek business cycle for a time period of over 40 years. Our findings clearly suggest that the Greek economy entered a recessionary business cycle regime in 2008 which was continued throughout 2012. Keywords: Business cycle turning points, dating algorithms, recession, Greece Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: E32 Year: 2014 Pages: 1-24 Volume: 2014 Issue: 1 Handle: RePEc:oec:stdkab:5JZ0SR0PNHS8 Template-type: ReDIF-Article 1.0 Author-Name: Christian Seiler Title: On the robustness of balance statistics with respect to nonresponse Abstract: A general problem for survey conductors is the fact that the response decision can be connected to the intended answer of the non-respondents. This nonresponse bias might have a substantial effect on the aggregated results. In this paper, a participation framework for the widely used business cycle balance statistics indicators is examined. An extensive simulation study is performed to analyse their effects. The analyses show that these indicators are extremely stable towards nonresponse biases. Keywords: balance statistics, business tendency survey, nonresponse bias, simulation study Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2015 Pages: 45-62 Volume: 2014 Issue: 2 Handle: RePEc:oec:stdkab:5JRXQBWCJDR3 Template-type: ReDIF-Article 1.0 Author-Name: Maritta Paloviita Author-Name: Matti Viren Title: What's behind the survey values?: An analysis of individual forecasters' behaviour Abstract: This paper studies the internal consistency of professional forecasts on a micro level using three alternative data sets. The analysis is mainly based on the ECB Survey of Professional Forecasts for the euro area, but for comparison we also study the Consensus Economics survey and Survey of Professional Forecasts for the US. Forecast uncertainty is explored using two alternative measures, the conventional standard deviation of individual point forecasts and the mean uncertainty based on subjective probability distributions of survey respondents. Our analysis indicates that individual forecasters’ price and real GDP expectations are positively related, but that forecasters deviate systematically from each other. We also find clear evidence that individual forecasters form expectations according to the hybrid specification of the New Keynesian Phillips curve. On a micro level, inflation uncertainty seems to be closely related to output uncertainty. However, the relationship between alternative measures of uncertainty is relatively weak. Keywords: Forecasting, Survey data, Expectations, Phillips curve Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C53; E31; E37 Year: 2015 Pages: 25-43 Volume: 2014 Issue: 2 Handle: RePEc:oec:stdkab:5JRXQBWCKBZV Template-type: ReDIF-Article 1.0 Author-Name: Ginters Buss Title: Tracking economic activity in the euro area: Multivariate direct filter approach Abstract: The paper applies the multivariate direct filter approach on selected business and consumer confidence indicators, and share price data to construct a real-time indicator tracking the medium-to-long-run component of the quarterly growth of the euro area gross domestic product. Results show that the created indicator behaves similarly to another established indicator, Eurocoin, but slightly leads it after mid 2009. The new indicator is also compared to the Markit Euro Area Composite Purchasing Managers Index and is found to be leading it by about one month as well as being smoother. Overall, the multivariate direct filter approach is found to have merit in tracking business cycle developments, however, the increasing number of free coefficients is an issue for the filter to be applied to detailed datasets. Keywords: real-time signal extraction, business cycles, multivariate time series JEL classification: C13, C32, E32 Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Year: 2015 Pages: 5-25 Volume: 2014 Issue: 2 Handle: RePEc:oec:stdkab:5JS0BCTS1433 Template-type: ReDIF-Article 1.0 Author-Name: António Rua Author-Name: Artur Silva Lopes Title: Cohesion within the euro area and the US: A wavelet-based view Abstract: The analysis of synchronisation of macroeconomic fluctuations across countries or regions has been crucial, for example, for the debate on economic integration. In this paper, we propose a multivariate measure of synchronisation to assess cohesion across countries or regions by resorting to wavelet analysis. This wavelet-based measure of cohesion allows one to study how synchronisation has evolved over time and across frequencies simultaneously. In particular, we investigate the cohesion among euro area countries and within the US, both at the regional and state levels, over the last decades. In addition, an analysis at the sectoral level is also conducted. The results obtained unveil a noteworthy heterogeneity and highlight the usefulness of a wavelet-based measure of cohesion. Keywords: cohesion, wavelets, time-frequency, output growth Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C40; E32 Year: 2015 Pages: 63-76 Volume: 2014 Issue: 2 Handle: RePEc:oec:stdkab:5JS1J15792ZP Template-type: ReDIF-Article 1.0 Author-Name: Christian Müller Author-Email: much@zhaw.ch Author-Name: Eva Köberl Title: Business cycle dynamics: A bottom-up approach with Markov-chain measurement Abstract: Business cycle dynamics can be seen as footprints left by individual decision makers. Tracing those footprints we offer a novel, largely model independent and exogenous measure of the business cycle dynamics. This measure also, allows for distinguishing positive and negative shocks without prior estimation. Utilizing more than twentythousand observations of firms surveyed quarterly in the periods (1999-2006), we employ a Markov-chain approach combined with conventional time series econometrics for gauging the dynamics of business cycles. Since we start the analysis with firm level data we label our method the “bottom-up approach”. Keywords: Business cycle dynamics, shock identification, Markov-chain, impulseresponse analysis. Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C40; C50; E32 Year: 2015 Pages: 41-61 Volume: 2015 Issue: 1 Handle: RePEc:oec:stdkab:5JRS0LV6XS7B Template-type: ReDIF-Article 1.0 Author-Name: Andreas Groth Author-Name: Michael Ghil Author-Name: Stéphane Hallegatte Author-Name: Patrice Dumas Title: The role of oscillatory modes in US business cycles Abstract: We apply multivariate singular spectrum analysis to the study of US business cycle dynamics. This method provides a robust way to identify and reconstruct oscillations, whether intermittent or modulated. We show such oscillations to be associated with comovements across the entire economy. The problem of spurious cycles generated by the use of detrending filters is addressed and we present a Monte Carlo test to extract significant oscillations. The behavior of the US economy is shown to change significantly from one phase of the business cycle to another: the recession phase is dominated by a five-year mode, while the expansion phase exhibits more complex dynamics, with higher-frequency modes coming into play. We show that the variations so identified cannot be generated by random shocks alone, as assumed in “real” business-cycle models, and that endogenous, deterministically generated variability has to be involved. Keywords: Advanced spectral methods, comovements, frequency domain, Monte Carlo testing, time domain Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C15; C60; E32 Year: 2015 Pages: 63-81 Volume: 2015 Issue: 1 Handle: RePEc:oec:stdkab:5JRS0LV715WL Template-type: ReDIF-Article 1.0 Author-Name: Allan Layton Author-Email: layton@usq.edu.au Author-Name: Anirvan Banerji Author-Name: Lakshman Achuthan Title: The world and “The world business cycle chronology” Abstract: Twenty-one individual country business cycle chronologies, maintained and updated by the Economic Cycle Research Institute (ECRI), are analysed for their degree of synchronisation with a proposed “world business cycle chronology”. Several key results emerge. First, perhaps not surprisingly, the world’s four 20th Century locomotor economies of the US, UK, Germany and Japan are statistically significantly and reasonably strongly positively synchronised with the world cycle. Second, European countries in the sample are either positively synchronised with the world cycle at zero lag or with a lag of around three months. Third, the NAFTA countries (US, Canada and Mexico) are, perhaps again not unexpectedly, quite strongly positively synchronised with the world cycle at zero lag and with each other. Fourth, the single South American country included in the sample, Brazil, is strongly positively synchronised with the world cycle at zero lag as well as with the NAFTA countries – but behaves very differently from China and India with respect to the world cycle. Fifth, interestingly, the newly industrialized East Asian countries included in the sample appear to lead the world cycle by about three to nine months. Finally, and very interestingly, there appears to be some a priori evidence of a long leading negative synchronisation between the commodity exporting countries in the sample and the world cycle. Key words: world business cycle, synchronisation JEL classification: E32, E37 Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: E32; E37 Year: 2015 Pages: 23-40 Volume: 2015 Issue: 1 Handle: RePEc:oec:stdkab:5JRTFL953JXP Template-type: ReDIF-Article 1.0 Author-Name: Klaus Abberger Author-Email: abberger@ifo.de Author-Name: Wolfgang Nierhaus Title: Construction of composite business cycle indicators in a scarce data environment: A case study for Abu Dhabi Abstract: Business cycle indicators are important instruments for monitoring economic development. When employing indicators one usually relies on a sound statistical database. This paper deals with indicator development in a scarce data situation. Indicator building is merged with temporal disaggregation, which is often used by statistical offices. The discussed tools are applied in a case study for Abu Dhabi. Because the economy of Abu Dhabi is very dependent on oil, real income reflects the economic situation better than real gross domestic product (GDP). For this reason a measure of real gross domestic income (GDI) was chosen as reference series. Keywords: Business cycle indicators, temporal disaggregation, terms of trade, oilproducing countries JEL code: E01, E32, C22 Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C22; E01; E32 Year: 2015 Pages: 83-95 Volume: 2015 Issue: 1 Handle: RePEc:oec:stdkab:5JRTFL9554BT Template-type: ReDIF-Article 1.0 Author-Name: Daniela Bragoli Author-Name: Luca Metelli Author-Name: Michele Modugno Title: The importance of updating: Evidence from a Brazilian nowcasting model Abstract: How often should we update predictions for economic activity? Gross domestic product is a quarterly variable disseminated usually a couple of months after the end of the quarter, but many other macroeconomic indicators are released with a higher frequency, and financial markets react very strongly to them. However, most of the professional forecasters, including the IMF, the OECD, and most central banks, tend to update their forecasts of economic activity only two to four times a year. The Central Bank of Brazil, not only disseminates its official forecasts every quarter as other central banks, but also collects and publishes the results of professional forecasters’ survey data at a daily frequency. The aim of this article is to evaluate the forecasting performance of the Central Bank of Brazil Survey and to compare it with the mechanical forecasts based on state-of-the-art nowcasting techniques. Results indicate that both model and market participant predictions are well behaved, i.e. as more information becomes available their accuracy and correlation with the actual realization increases. In terms of performance the model seems to be slightly better than the institutional forecasts in the nowcast and backcast. Keywords: Nowcasting, Updating, Dynamic Factor Model. JEL classification: C33, C53, E37. Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C33; C53; E37 Year: 2015 Pages: 5-22 Volume: 2015 Issue: 1 Handle: RePEc:oec:stdkab:5JRTFL958GMP Template-type: ReDIF-Article 1.0 Author-Name: Eva A. Arnold Title: The role of data revisions and disagreement in professional forecasts Abstract: This study has two primary objectives: 1) To investigate whether official data releases of macroeconomic indicators are systematically revised 2) To evaluate the accuracy and disagreement of professional forecasters with respect to initial releases and final values. The analyses are applied to individual forecasts and real-time releases using a unique data set regarding 52 macroeconomic indicators for the US, the Eurozone, and Germany for the period of 1999-2010. The empirical analysis of data revisions shows that some indicators are considerably and systematically revised. Forecasters tend to account for systematic revisions and try to predict final values for certain indicators. For others, forecasters appear to be targeting initial releases, even though these indicators are systematically revised. In the latter case, forecasters use information inefficiently. Forecasters’ disagreement regarding fundamentals is higher during domestic recessions and when the national stock market is volatile. Keywords: Rational expectations, macroeconomic indicators, disagreement, survey analysis, real-time data JEL classification: D81, D84, E17 Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: D81; D84; E17 Year: 2016 Pages: 1-39 Volume: 2015 Issue: 2 Handle: RePEc:oec:stdkab:5JLZ9HHP5CG3 Template-type: ReDIF-Article 1.0 Author-Name: Johnnie B. Linn III Title: Reverse-engineering the business cycle with Petri nets Abstract: Petri nets are used to extract information from the complex and negative eigenvalues of a von Neumann model employing the US sector-level use tables from 1997 to 2013. The complex eigenvalues show a cyclical component having a period of about 10 years. Sectors that contribute most to the cyclical component are agriculture, mining, retail trade, construction, and utilities. Negative eigenvalues indicate the instability in the economy from 1997 to 2009. In 2010 a Neimark-Sacker bifurcation boundary is crossed, beyond which the economy exhibits damping. The point of critical damping is approached in 2012. In 2013 the economy exhibits over-damping. Keywords: Petri net, von Neumann growth model, Leontief model, eigenvalue, business cycle, use table, Neimark-Sacker bifurcation, over-damping JEL classification: C65, C67, E32 Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C65; C67; E32 Year: 2016 Pages: 1-28 Volume: 2015 Issue: 2 Handle: RePEc:oec:stdkab:5JLZ9HHP8FNS Template-type: ReDIF-Article 1.0 Author-Name: Louise Holm Title: The Swedish business cycle, 1969-2013 Abstract: The aim of this paper is to apply a non-stationary, non-parametric method to date the Swedish business cycle where no official dating method exists, defined as the common dynamic of some macroeconomic time series. The method draws on a paper where the business cycle for the euro area by Holm (2011) was found and the method worked well and closely matched the dates found by the Centre for Economic Policy Research, CEPR. In this paper five recessions were found for Sweden in the 1969-2013 period. Keywords: Business cycle, non-parametric smoothing, non-stationarity JEL: C14, C32, E32 Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C14; C32; E32 Year: 2016 Pages: 1-22 Volume: 2015 Issue: 2 Handle: RePEc:oec:stdkab:5JLZ9HHPJ4TH Template-type: ReDIF-Article 1.0 Author-Name: Pami Dua Author-Name: Vineeta Sharma Author-Email: vineeta@econdse.org Title: A comparison of economic indicator analysis and Markov switching methods concerning the cycle phase dynamics: report Abstract: This paper compares the dating of growth rate cycles obtained from a Markov switching approach with the reference chronologies based on Economic Indicator Analysis (EIA) given by the Economic Cycle Research Institute (ECRI), focusing on a set of developed and emerging economies. The developed countries include US, UK, Germany and Japan, which are compared with an emerging economy, India. Using a univariate Markov regime switching model we characterise growth rate cycle phenomena for these countries by identifying turning points and distinct economic regimes, employing data on the growth rate of the coincident index given by ECRI. Keywords: Economic Indicator Analysis, Growth rate cycles, Markov switching models, business cycle phases Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C22; E32 Year: 2016 Pages: 1-27 Volume: 2015 Issue: 2 Handle: RePEc:oec:stdkab:5JM22PFHMHLP Template-type: ReDIF-Article 1.0 Author-Name: Aviral Kumar Tiwari Author-Name: Niyati Bhanja Author-Name: Arif Billah Dar Title: Frequency based co-movement of inflation in selected euro area countries Abstract: This paper investigates the extent to which inflation rates in selected euro area countries are synchronised. The synchronisation of inflation is analysed using the multiple-correlation and multiple cross correlation at different frequencies using the methodology of wavelets. This new measure of cohesion based on wavelets allows us to assess how synchronisation has fevolved across different frequencies. Our results indicate that inflation correlations are more apparent at lower frequencies and the co-movement grows with lower frequencies. When we allow the correlation to be analysed across different frequencies as well as over time, our results indicate that the correlation has increased after the formation of euro area probably because of the common monetary policy. Keywords: Co-movement, wavelets, time-frequency, inflation cycles JEL classification: C40, E31, E32, F44 Journal: OECD Journal: Journal of Business Cycle Measurement and Analysis Classification-JEL: C40; E31; E32; F44 Year: 2016 Pages: 1-13 Volume: 2015 Issue: 2 Handle: RePEc:oec:stdkab:5JM26TTLXDD1