Industrial output fluctuations in developed countries : a time-scale decomposition analysis

In this paper we apply the wavelets methodology to the analysis business cycle fluctuations. The analysis is performed using the industrial production index in 6 developed countries between 1960-2002. We produce an orthogonal decomposition of industrial output series by time scale over six different time scales and analyze the characteristics (volatility, frequency and asymmetry) and the co-movements of these time scale components across countries and over time. Our results show that time scale decomposition through wavelet analysis may reveal very different aspects in the characteristics and correlations of business cycle fluctuations.