A real-time recession indicator for the Euro area

Laurent Ferrara

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we propose a new coincident monthly indicator to detect in real-time the start and the end of an economic recession phase for the Euro area. In this respect, we use the methodology proposed in Anas and Ferrara (2002, 2004) as regards the recession indicator for the US, based on Markov-Switching processes popularized in economics by Hamilton (1989). By using a set of four monthly time series, we show that this start-end recession indicator (SERI) is able to reproduce all the recession phases experienced by the Euro area since 1970. Concerning the last low phase of the growth cycle in the Euro area, started in 2001, empirical results show that the Euro area experienced a « quasi-recession » phase, located between the end of the 2001 year and the beginning of 2002, without a global recession. This is due to a lack of diffusion of this phenomena among the main Eurozone countries, though it was synchronized.

Keywords: Recession; real-time; probabilistic indicator; Euro area (search for similar items in EconPapers)
JEL-codes: C32 C51 E32 (search for similar items in EconPapers)
Date: 2006-06
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:4042

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