Working Paper

Monitoring the world business cycle

Abstract: We propose a Markov-switching dynamic factor model to construct an index of global business cycle conditions, to perform short-term forecasts of world GDP quarterly growth in real time and to compute real-time business cycle probabilities. To overcome the real-time forecasting challenges, the model accounts for mixed frequencies, for asynchronous data publication and for leading indicators. Our pseudo real-time results show that this approach provides reliable and timely inferences of the world quarterly growth and of the world state of the business cycle on a monthly basis.

JEL Classification: C22; E27; E32;

https://doi.org/10.24149/gwp228

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Globalization Institute Working Papers

Publication Date: 2015-02-01

Number: 228

Note: Published as: Camacho, Maximo and Jaime Martinez-Martin (2015), "Monitoring the World Business Cycle," Economic Modeling 51: 617-625.