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Federal Reserve Bank of Dallas
Globalization Institute Working Papers
Monitoring the world business cycle
Maximo Camacho
Jaime Martinez-Martin
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.


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Maximo Camacho & Jaime Martinez-Martin, Monitoring the world business cycle, Federal Reserve Bank of Dallas, Globalization Institute Working Papers 228, 01 Feb 2015.
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Note: Published as: Camacho, Maximo and Jaime Martinez-Martin (2015), "Monitoring the World Business Cycle," Economic Modeling 51: 617-625.
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DOI: 10.24149/gwp228
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