Series: Working Papers. 1509.
Author: Maximo Camacho and Jaime Martinez-Martin.
Published in: Economic Modelling, Elsevier, vol. 51(C), pages 617-625.
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Abstract
We propose a Markov-switching dynamic factor model to construct an index of global business cycle conditions, for performing short-term forecasts of quarterly world GDP growth in real time and computing real-time business cycle probabilities. To overcome the real-time forecasting challenges, the model takes into account mixed frequencies, asynchronous data publication and leading indicators. Our pseudo real-time results show that this approach provides reliable and timely inferences of quarterly world growth and of the state of the world business cycle on a monthly basis.