SFB 303 Discussion Paper No. B - 448
Author: Dueker,
M., and K. Wesche
Title: European Business Cycles: New Indices and Analysis of their
Synchronicity
Abstract: This article presents a new type of business-cycle index that allowsM
for cycle-to-cycle comparisons of the depth of recessions within a country,M
cross-country comparisons of business-cycle correlation andM
simple aggregation to arrive at a measure of a European business cycle.M
The paper examines probit-type specifications of binary recession/expansionM
variables in a Gibbs-sampling framework, wherein it is possible to
incorporateM
time-series features to the model, such as serial correlation,M
heteroscedasticity and regime switching. The data-augmentation impliedM
by Gibbs sampling generates posterior distributions for a latent coincidentM
business-cycle index and extracts information from indicator variables,M
such as the slope of the yield curve.M
Sub-sample correlations between an aggregated `Europe'' index andM
the national business-cycle indices from France, Germany, ItalyM
are consistent with the claimM
that the European economies are becoming more harmonizedM
over time, but there is no guarantee that this patternM
will hold in the future.
Keywords: Recessions, Gibbs sampler, cyclical indicators
JEL-Classification-Number: F42, C25, C22
Creation-Date: February 1999
URL: ../1999/b/bonnsfb448.pdf
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