Measuring Global Real Economic Activity: Do Recent Critiques Hold Up to Scrutiny?

13 Pages Posted: 21 Feb 2019

See all articles by Lutz Kilian

Lutz Kilian

University of Michigan at Ann Arbor - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: 2019

Abstract

Hamilton (2018) suggests that the Kilian (2009) index of global real economic activity is misleading and calls for alternative measures. The problem documented by Hamilton is a consequence of a coding mistake. Specifically, the index of nominal freight rates underlying the Kilian index was accidentally logged twice. Once this coding error is corrected by removing one of the log transformations, none of the concerns raised by Hamilton remains valid and the index may be used as originally intended. Moreover, it can be shown that the corrected index differs only slightly from the original index and that the key empirical results in Kilian (2009) and related studies remain unchanged when replacing the index.

Keywords: global business cycle, shipping, commodity market, oil, log transformation

JEL Classification: Q310, Q430

Suggested Citation

Kilian, Lutz, Measuring Global Real Economic Activity: Do Recent Critiques Hold Up to Scrutiny? (2019). CESifo Working Paper No. 7461. Available at SSRN: https://ssrn.com/abstract=3338815

Lutz Kilian (Contact Author)

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States
734-764-2320 (Phone)
734-764-2769 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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