A cross-sectional approach to business cycle analysis

This paper by Floris van Ruth describes how the current stance of the business cycle can be derived from a mixed set containing a limited number of selected indicators. Using the Netherlands and the United States as examples, it is shown that it is possible to extract the business cycle from a mix of leading, coincident and lagging indicators, as long as the set is not skewed towards one particular type of indicator. Different methods, both direct and indirect, of deriving the common business cycle are used to test the robustness of the results. The similarity between the common cycles resulting from the different methods is seen as a confirmation of the validity of the common cycle interpretation of the business cycle.

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