The missing link: using the NBER recession indicator to construct coincident and leading indices of economic activity

João Victor Issler; Farshid Vahid

doi:10.1016/j.jeconom.2005.01.031

The missing link: using the NBER recession indicator to construct coincident and leading indices of economic activity

João Victor Issler^*, Farshid Vahid

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

16 Citations (Scopus)

Abstract

We use the information content in the decisions of the NBER Business Cycle Dating Committee to construct coincident and leading indices of economic activity for the United States. We identify the coincident index by assuming that the coincident variables have a common cycle with the unobserved state of the economy, and that the NBER business cycle dates signify the turning points in the unobserved state. This model allows us to estimate our coincident index as a linear combination of the coincident series. We compare the performance of our index with other currently popular coincident indices of economic activity.

Original language	English
Pages (from-to)	281-303
Number of pages	23
Journal	Journal of Econometrics
Volume	132
Issue number	1
DOIs	https://doi.org/10.1016/j.jeconom.2005.01.031
Publication status	Published - May 2006

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10.1016/j.jeconom.2005.01.031

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abstract = "We use the information content in the decisions of the NBER Business Cycle Dating Committee to construct coincident and leading indices of economic activity for the United States. We identify the coincident index by assuming that the coincident variables have a common cycle with the unobserved state of the economy, and that the NBER business cycle dates signify the turning points in the unobserved state. This model allows us to estimate our coincident index as a linear combination of the coincident series. We compare the performance of our index with other currently popular coincident indices of economic activity.",

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AB - We use the information content in the decisions of the NBER Business Cycle Dating Committee to construct coincident and leading indices of economic activity for the United States. We identify the coincident index by assuming that the coincident variables have a common cycle with the unobserved state of the economy, and that the NBER business cycle dates signify the turning points in the unobserved state. This model allows us to estimate our coincident index as a linear combination of the coincident series. We compare the performance of our index with other currently popular coincident indices of economic activity.

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KW - Canonical correlation

KW - Coincident and leading indicators

KW - Encompassing

KW - Instrumental variable probit

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The missing link: using the NBER recession indicator to construct coincident and leading indices of economic activity

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