This paper examines the business cycle linkages that propagate industry-specific business cycle shocks throughout the economy in a way that (sometimes) generates aggregated cycles. The transmission of sectoral business cycles is modelled through a multivariate Markov-switching model, which is...

This paper examines the business cycle linkages that propagate industry-specific business cycle shocks throughout the economy in a way that (sometimes) generates aggregated cycles. The transmission of sectoral business cycles is modelled through a multivariate Markov-switching model, which is...

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...

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...