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 indicator such as real GPD. 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.
Mariano, Roberto S. and Murasawa, Yasutomo.
A New Coincident Index of Business Cycles Based on Monthly and Quarterly Series. (2002). 18-2002,. Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/766
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