Green Shoots in the Euro Area: A Real Time Measure
40 Pages Posted: 23 Jul 2010
Date Written: July 22, 2010
We show that an extension of the Markov-switching dynamic factor models that accounts for the specificities of the day to day monitoring of economic developments such as ragged edges, mixed frequencies and data revisions is a good tool to forecast the Euro area recessions in real time. We provide examples that show the nonlinear nature of the relations between data revisions, point forecasts and forecast uncertainty. According to our empirical results, we think that the real time probabilities of recession are an appropriate statistic to capture what the press call green shoots.
Keywords: Business Cycles, Output Growth, Time Series
JEL Classification: E32, C22, E27
Suggested Citation: Suggested Citation