This paper proposes a framework to construct indexes of activity which links two strands of the index literature – the traditional business cycle analysis and the latent variable approach. To illustrate the method, we apply the framework to Australian regional data, namely to two resource-rich...

One of the main indicators of inflationary pressures used by the Reserve Bank of New Zealand is the output gap. A measure of potential output is obtained using a structural vector autoregression (SVAR) methodology. The assumption that movements in output are the result of cyclical shocks arising...