A new coincident index of business cycles based on monthly and quarterly series

• Main Authors: Mariano, Roberto S., Murasawa, Yasutomo
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2003
• Subjects: Factor analysis; Time series; Missing observation; State-space model; Kalman filter; Stock-Watson index; Econometrics; Finance
• Online Access: https://ink.library.smu.edu.sg/soe_research/374; https://ink.library.smu.edu.sg/context/soe_research/article/1373/viewcontent/New_Coincident_Index_of_Business_Cycles_Based_on_Monthly_pp_2002.pdf
• Institution: Singapore Management University

Popular monthly coincident indices of business cycles, e.g. the composite index and the Stock-Watson coincident index, have two shortcomings. First, they ignore information contained in quarterly indicators such as real GDP. Second, they lack economic interpretation; hence the heights of peaks and the depths of troughs depend on the choice of an index. This paper extends the Stock-Watson coincident index by applying maximum likelihood factor analysis to a mixed-frequency series of quarterly real GDP and monthly coincident business cycle indicators. The resulting index is related to latent monthly real GDP. [PUBLICATION ABSTRACT]