Popular monthly coincident indices of business cycles, e.g. the composite index and the Stock-Watson coincident index, have two shortcomings. First, they ignore information contained in quarterly indicators such as real GDP. Second, they lack economic interpretation; hence the heights of peaks and the depths of troughs depend on the choice of an index. This paper extends the Stock-Watson coincident index by applying maximum likelihood factor analysis to a mixed-frequency series of quarterly real GDP and monthly coincident business cycle indicators. The resulting index is related to latent monthly real GDP. [PUBLICATION ABSTRACT]
Econometrics | Finance
Journal of Applied Econometrics
Mariano, Roberto S. and Murasawa, Yasutomo.
A new coincident index of business cycles based on monthly and quarterly series. (2003). Journal of Applied Econometrics. 18, (4), 427-443. Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/374
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