Real-Time Weakness of the Global Economy: A First Assessment of the Coronavirus Crisis

Danilo Leiva-Leon (), Gabriel Pérez-Quirós () and Eyno Rots
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Gabriel Pérez-Quirós: European Central Bank and CEPR
Authors registered in the RePEc Author Service: Gabriel Perez Quiros

No 2020/4, MNB Working Papers from Magyar Nemzeti Bank (Central Bank of Hungary)

Abstract: We propose an empirical framework to measure the degree of weakness of the global economy in real‐time. It relies on non‐linear factor models designed to infer recessionary episodes of heterogeneous deepness, and fitted to the largest advanced economies (U.S., Euro Area, Japan, U.K., Canada and Australia) and emerging markets (China, India, Russia, Brazil, Mexico and South Africa). Based on such inferences, we construct a Global Weakness Index that has three main features. First, it can be updated as soon as new regional data is released, as we show by measuring the economic effects of coronavirus. Second, it provides a consistent narrative of the main regional contributors of world economy’s weakness. Third, it allows to perform robust risk assessments based on the probability that the level of global weakness would exceed a certain threshold of interest in every period of time. With information up to March 2nd 2020, we show that the Global Weakness Index already sharply increased at a speed at least comparable to the experienced in the 2008 crisis.

Keywords: International; Business Cycles; Factor Model; Nonlinear (search for similar items in EconPapers)
JEL-codes: C22 E27 E32 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2020
New Economics Papers: this item is included in nep-cis, nep-isf and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Related works:
Working Paper: Real-time weakness of the global economy: a first assessment of the coronavirus crisis (2020)
Working Paper: Real-Time Weakness of the Global Economy: A First Assessment of the Coronavirus Crisis (2020)
Working Paper: Real-time weakness of the global economy: a first assessment of the coronavirus crisis (2020)
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