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Monitoring the world business cycle

Maximo Camacho () and Jaime Martinez-Martin ()

No 1509, Working Papers from Banco de España

Abstract: We propose a Markov-switching dynamic factor model to construct an index of global business cycle conditions, for performing short-term forecasts of quarterly world GDP growth in real time and computing real-time business cycle probabilities. To overcome the real-time forecasting challenges, the model takes into account mixed frequencies, asynchronous data publication and leading indicators. Our pseudo real-time results show that this approach provides reliable and timely inferences of quarterly world growth and of the state of the world business cycle on a monthly basis.

Keywords: real-time forecasting; world economic indicators; business cycles; non-linear dynamic factor models (search for similar items in EconPapers)
JEL-codes: C22 E27 E32 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2015-03
New Economics Papers: this item is included in nep-fdg, nep-for and nep-mac
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Journal Article: Monitoring the world business cycle (2015) Downloads
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Working Paper: Monitoring the world business cycle (2015) Downloads
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