The missing link: using the NBER recession indicator to construct coincident and leading indices economic activity

We use the information content in the decisions of the NBER Business Cycle Dating Committee to construct coincident and leading indices of economic activity for the United States. We identify the coincident index by assuming that the coincident variables have a common cycle with the unobserved state of the economy, and that the NBER business cycle dates signify the turning points in the unobserved state. This model allows us to estimate our coincident index as a linear combination of the coincident series. We establish that our index performs better than other currently popular coincident indices of economic activity.

The missing link: using the NBER recession indicator to construct coincident and leading indices economic activity

We use the information content in the decisions of the NBER Business Cycle Dating Committee to construct coincident and leading indices of economic activity for the United States. We identify the coincident index by assuming that the coincident variables have a common cycle with the unobserved state of the economy, and that the NBER business cycle dates signify the turning points in the unobserved state. This model allows us to estimate our coincident index as a linear combination of the coincident series. We establish that our index performs better than other currently popular coincident indices of economic activity.

The missing link: using the NBER recession indicator to construct coincident and leading indices economic activity

We use the information content in the decisions of the NBER Business Cycle Dating Committee to construct coincident and leading indices of economic activity for the United States. We identify the coincident index by assuming that the coincident variables have a common cycle with the unobserved state of the economy, and that the NBER business cycle dates signify the turning points in the unobserved state. This model allows us to estimate our coincident index as a linear combination of the coincident series. We compare the performance of our index with other currently popular coincident indices of economic activity.

Addressing important econometric issues on how to construct theoretical based exchange rate misalignment estimates

Exchange rate misalignment assessment is becoming more relevant in recent period particularly after the nancial crisis of 2008. There are di erent methodologies to address real exchange rate misalignment. The real exchange misalignment is de ned as the di erence between actual real e ective exchange rate and some equilibrium norm. Di erent norms are available in the literature. Our paper aims to contribute to the literature by showing that Behavioral Equilibrium Exchange Rate approach (BEER) adopted by Clark & MacDonald (1999), Ubide et al. (1999), Faruqee (1994), Aguirre & Calderón (2005) and Kubota (2009) among others can be improved in two following manners. The rst one consists of jointly modeling real e ective exchange rate, trade balance and net foreign asset position. The second one has to do with the possibility of explicitly testing over identifying restrictions implied by economic theory and allowing the analyst to show that these restrictions are not falsi ed by the empirical evidence. If the economic based identifying restrictions are not rejected it is also possible to decompose exchange rate misalignment in two pieces, one related to long run fundamentals of exchange rate and the other related to external account imbalances. We also discuss some necessary conditions that should be satis ed for disrcarding trade balance information without compromising exchange rate misalignment assessment. A statistical (but not a theoretical) identifying strategy for calculating exchange rate misalignment is also discussed. We illustrate the advantages of our approach by analyzing the Brazilian case. We show that the traditional approach disregard important information of external accounts equilibrium for this economy.