An Automatic Algorithm to Date the Reference Cycle of the Spanish Economy

This paper provides an accurate chronology of the Spanish reference business cycle adapting a multiple change-point model. In that approach, each combination of peaks and troughs dated in a set of economic indicators is assumed to be a realization of a mixture of bivariate Gaussian distributions, whose number of components is estimated from the data. The means of each of these components refer to the dates of the reference turning points. The transitions across the components of the mixture are governed by Markov chain that is restricted to force left-to-right transition dynamic. In the empirical application, seven recessions in the period from 1970.2 to 2020.2 are identified, which are in high concordance with the timing of the turning point dates established by the Spanish Business Cycle Dating Committee (SBCDC).

Traditional and Alternative Business Cycle Dating Procedures: Evidence for the Euro Area and the Czech Economy

This paper examines to which extent the results of multivariate principal component analysis based on a set of macroeconomic indicators used by one of the leading economic research organizations – the Centre for Economic Policy Research (CEPR), mimics traditional, univariate Bry and Boschan (1971) business cycle procedure. Using almost 20 years of observations, we estimate the euro area aggregate and the Czech business cycles by classical, as well as alternative multivariate method. Comparison of the euro area aggregate classical business cycle with that of the CEPR reveals minor discrepancies. The estimation of the Czech business cycle using principal component analysis suffers from volatile time series, potentially resulting from a smaller character of the economy. On the contrary, the estimate of the euro area aggregate business cycle reflects quite well Bry and Boschan (1971) procedure, showing rather lagging behavior.

Evaluating the Classification of Economic Activity into Recessions and Expansions

The Business Cycle Dating Committee of the National Bureau of Economic Research provides a historical chronology of business cycle turning points. We investigate three central aspects of this chronology. How skillful is the Dating Committee when classifying economic activity into expansions and recessions? Which indices of economic conditions best capture the current but unobservable state of the business cycle? And which indicators best predict future turning points, and at what horizons? We answer each of these questions in detail using methods specifically designed to assess classification ability. In the process, we clarify several important features of the business cycle. (JEL C82, E32)