European business cycles: new indices and analysis of their synchronicity

Michael Dueker and Katrin Wesche
Authors registered in the RePEc Author Service: Katrin Assenmacher

No 1999-019, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This article presents a new type of business-cycle index that allows for cycle-to-cycle comparisons of the depth of recessions within a country, cross-country comparisons of business-cycle correlation and simple aggregation to arrive at a measure of a European business cycle. The paper examines probit-type specifications of binary recession/expansion variables in a Gibbs-sampling framework, wherein it is possible to incorporate time-series features to the model, such as serial correlation, heteroskedasticity and regime switching. The data-augmentation implied by Gibbs sampling generates posterior distributions for a latent coincident business-cycle index and extracts information from indicator variables, such as the slope of the yield curve. Sub-sample correlations between an aggregated ``Europe'' index and the national business-cycle indices from France, Germany, Italy are consistent with the claim that the European economies are becoming more harmonized over time, but there is no guarantee that this pattern will hold in the future.

Keywords: Business cycles; European Economic Community (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (4)

Published in Economic Inquiry, January 2003, 41(1), pp. 116-31

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