Dating Business Cycles: A Methodological Contribution with an Application to the Euro Area

29 Pages Posted: 7 Sep 2004

See all articles by Michael J. Artis

Michael J. Artis

University of Manchester - Institute for Political & Economic Governance (IPEG)

Massimiliano Giuseppe Marcellino

European University Institute; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); Bocconi University - Department of Economics; Centre for Economic Policy Research (CEPR)

Tommaso Proietti

University of Rome II - Department of Economics and Finance

Abstract

This paper proposes a dating algorithm based on an appropriately defined Markov chain that enforces alternation of peaks and troughs, and duration constraints concerning the phases and the full cycle. The algorithm, which implements Harding and Pagan's non-parametric dating methodology, allows an assessment of the uncertainty of the estimated turning points caused by filtering and can be used to construct indices of business cycle diffusion, aiming at assessing how widespread are cyclical movements throughout the economy. Its adaptation to the notion of a deviation cycle and the imposition of depth constraints are also discussed. We illustrate the algorithm with reference to the issue of dating the euro-area business cycle and analysing its characteristics, both from the classical and the growth cycle perspectives.

Suggested Citation

Artis, Michael J. and Marcellino, Massimiliano and Proietti, Tommaso, Dating Business Cycles: A Methodological Contribution with an Application to the Euro Area. Oxford Bulletin of Economics and Statistics, Vol. 66, No. 4, pp. 537-565, September 2004. Available at SSRN: https://ssrn.com/abstract=573038

Michael J. Artis (Contact Author)

University of Manchester - Institute for Political & Economic Governance (IPEG) ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

Massimiliano Marcellino

European University Institute ( email )

Villa Schifanoia
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Firenze (Florence), Tuscany 50014
Italy

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

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50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Bocconi University - Department of Economics ( email )

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Milan, 20136
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Tommaso Proietti

University of Rome II - Department of Economics and Finance ( email )

Via Columbia, 2
Rome, 00133
Italy

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