A new coincident index of business cycles based on monthly and quarterly series
Roberto Mariano () and
Yasutomo Murasawa ()
Journal of Applied Econometrics, 2003, vol. 18, issue 4, 427-443
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. Copyright © 2002 John Wiley & Sons, Ltd.
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