Common and Idiosyncratic Components in Real Output: Further International Evidence

IMF Working Papers, December 1, 2002

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The paper analyzes the characteristics—duration, amplitude, steepness, and cumulative output movements—of the real GDP series of France, Germany, Italy, the rest of the euro area, and the United States using the classical (level) definition of business cycles.
An index of concordance and its test statistic suggest a great deal of comovement/synchronization between output cycles.
A dynamic factor model is estimated following the concordance result.
Output fluctuations are mostly explained by a global common component and an euro area common component.
Idiosyncratic components also matter, especially for France, the rest of the euro area, and the United States.

Uses the classical (level) definition of business cycles to characterize real GDP movements by duration, amplitude, steepness, and cumulative output movements.
Employs an index of concordance and its test statistic to assess comovement/synchronization between output cycles.
Estimates a dynamic factor model to decompose output fluctuations into common and idiosyncratic components.

Subjects: Business cycles, Cyclical indicators, Econometric analysis, Economic growth, Factor models, Inflation, Prices, Social security contributions, Taxes
Keywords: business cycles, common, Cyclical indicators, European and idiosyncratic components, Factor models, FR expansion, FR real GDP series, Global, Inflation, IT output, Italy, pairs FR-IT, REA output, real GDP, Social security contributions, state-space Models, WP

Common and Idiosyncratic Components in Real Output: Further International Evidence - WP/02/229
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