Monitoring the World Business Cycle
26 Pages Posted: 31 Mar 2015 Last revised: 15 Jul 2015
Date Written: March 30, 2015
We propose a Markov-switching dynamic factor model to construct an index of global business cycle conditions, for performing short-term forecasts of quarterly world GDP growth in real time and computing real-time business cycle probabilities. To overcome the real-time forecasting challenges, the model takes into account mixed frequencies, asynchronous data publication and leading indicators. Our pseudo real-time results show that this approach provides reliable and timely inferences of quarterly world growth and of the state of the world business cycle on a monthly basis.
Keywords: real-time forecasting, world economic indicators, business cycles, non-linear dynamic factor models
JEL Classification: E32, C22, E27
Suggested Citation: Suggested Citation