Green Shoots in the Euro Area: A Real Time Measure

40 Pages Posted: 23 Jul 2010

See all articles by Maximo Camacho

Maximo Camacho

Autonomous University of Barcelona - Department of Economics; Universidad de Murcia - Departamento de Metodos Cuantitativos

Gabriel Perez-Quiros

Banco de España

Pilar Poncela

Universidad Autónoma de Madrid

Date Written: July 22, 2010

Abstract

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

Camacho, Maximo and Perez-Quiros, Gabriel and Poncela, Pilar, Green Shoots in the Euro Area: A Real Time Measure (July 22, 2010). Banco de Espana Working Paper No. 1026, Available at SSRN: https://ssrn.com/abstract=1646848 or http://dx.doi.org/10.2139/ssrn.1646848

Maximo Camacho (Contact Author)

Autonomous University of Barcelona - Department of Economics ( email )

Avda. Diagonal 690
Barcelona, 08034
Spain

Universidad de Murcia - Departamento de Metodos Cuantitativos ( email )

Campus de Espinardo
30100 Murcia
Spain
+34 968 367 982 (Phone)

Gabriel Perez-Quiros

Banco de España ( email )

Madrid 28014
Spain

Pilar Poncela

Universidad Autónoma de Madrid ( email )

Campus Cantoblanco
C/Kelsen, 1
Madrid, Madrid 28049
Spain

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