A New Coincident Index of Business Cycles Based on Monthly and Quarterly Series

Author

Roberto S. Mariano, Singapore Management UniversityFollow
Yasutomo Murasawa, Osaka Prefecture University

Publication Type

Working Paper

Version

publishedVersion

Publication Date

4-2002

Abstract

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.

Keywords

Factor analysis, Time series, Missing observation, State-space model, Kalman filter, Stock-Watson index

Discipline

Econometrics | Finance

Research Areas

Econometrics

Volume

18-2002

First Page

1

Last Page

24

Publisher

SMU Economics and Statistics Working Paper Series, No. 18-2002

City or Country

Singapore

Citation

Mariano, Roberto S. and Murasawa, Yasutomo. A New Coincident Index of Business Cycles Based on Monthly and Quarterly Series. (2002). 18-2002, 1-24.
Available at: https://ink.library.smu.edu.sg/soe_research/766

Copyright Owner and License

Authors

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.

Comments

Published in Journal of Applied Econometrics, 2003, 18 (4), 427-443. https://doi.org/10.1002/jae.695