Economic Cycles and Their Synchronization: A Survey of Spectral Properties

L. Sella Sella, G. Vivaldo, A. Groth Groth and M. Ghil
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L. Sella Sella: Department of Economics “S. Cognetti de Martiis", University of Turin, Italy, CNR-Ceris, Moncalieri, Italy
G. Vivaldo: Istituto Nazionale di Fisica Nucleare (INFN), Turin, Italy
A. Groth Groth: Environmental Research & Teaching Institute and Geosciences Department, Ecole Normale Supérieure, France
M. Ghil: Environmental Research & Teaching Institute and Geosciences Department, Ecole Normale Supérieure, France, Department of Atmospheric & Oceanic Sciences and Institute of Geophysics & Planetary Physics, University of California, USA

No 2013.105, Working Papers from Fondazione Eni Enrico Mattei

Abstract: The present work applies several advanced spectral methods to the analysis of macroeconomic fluctuations in three countries of the European Union: Italy, The Netherlands, and the United Kingdom. We focus here in particular on singular-spectrum analysis (SSA), which provides valuable spatial and frequency information of multivariate data and that goes far beyond a pure analysis in the time domain. The spectral methods discussed here are well established in the geosciences and life sciences, but not yet widespread in quantitative economics. In particular, they enable one to identify and describe nonlinear trends and dominant cycles | including seasonal and interannual components that characterize the deterministic behavior of each time series. These tools have already proven their robustness in the application on short and noisy data, and we demonstrate their usefulness in the analysis of the macroeconomic indicators of these three countries. We explore several fundamental indicators of the countries' real aggregate economy in a univariate, as well as a multivariate setting. Starting with individual single-channel analysis, we are able to identify similar spectral components among the analyzed indicators. Next, we consider combinations of indicators and countries, in order to take different effects of comovements into account. Since business cycles are cross-national phenomena, which show common characteristics across countries, our aim is to uncover hidden global behavior across the European economies. Results are compared with previous findings on the U.S. indicators (Groth et al., 2012). Finally, the analysis is extended to include several indicators from the U.S. economy, in order to examine its influence on the European market.

Keywords: Advanced Spectral Methods; European Business Cycle; Frequency Domain; Time Domain (search for similar items in EconPapers)
JEL-codes: C15 C60 E32 (search for similar items in EconPapers)
Date: 2013-12
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (1)

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