This paper builds an innovative composite world trade cycle index (WTI) by means of a dynamic factor model to perform short-term forecasts of world trade growth of both goods and (usually neglected) services. The selection of trade indicator series is made using a multidimensional approach,...

This paper proposes a new approach to the analysis of the reference cycle turning points, defined on the basis of the specific turning points of a broad set of coincident economic indicators. Each individual pair of specific peaks and troughs from these indicators is viewed as a realization of a...

We show that the single-index dynamic factor model developed by Aruoba and Diebold (Am Econ Rev, 100:20-24, 2010) to construct an index of US business cycle conditions is also very useful for forecasting US GDP growth in real time. In addition, we adapt the model to include survey data and...

We propose a Markov-switching dynamic factor model to construct an index of global business cycle conditions, for performing short-term forecasts of quarterly world GDP growth in real time and computing real-time business cycle probabilities. To overcome the real-time forecasting challenges, the...

The focus of this paper is on nowcasting and forecasting quarterly private consumption. The selection of real-time, monthly indicators focuses on standard (“hard”/“soft” indicators) and less-standard variables. Among the latter group we analyze: i) proxy indicators of economic and policy...

We examine the short-term performance of two alternative approaches to forecasting using dynamic factor models. The first approach extracts the seasonal component of the individual indicators before estimating the dynamic factor model, while the alternative uses the non-seasonally adjusted data...

We propose an empirical framework to measure the degree of weakness of the global economy in real-time. It relies on nonlinear factor models designed to infer recessionary episodes of heterogeneous deepness, and fitted to the largest advanced economies (U.S., Euro Area, Japan, U.K., Canada and...

We extend the Markov-switching dynamic factor model to account for some of the specifi cities of the day-to-day monitoring of economic developments from macroeconomic indicators, such as ragged edges and mixed frequencies. We examine the theoretical benefi ts of this extension and corroborate...

We examine the finite-sample performance of small versus large scale dynamic factor models. Our Monte Carlo analysis reveals that small scale factor models out-perform large scale models in factor estimation and forecasting for high levels of cross-correlation across the idiosyncratic errors of...

We develop a twofold analysis of how the information provided by several economic indicators can be used in Markov-switching dynamic factor models to identify the business cycle turning points. First, we compare the performance of a fully non-linear multivariate specification (one-step approach)...