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Tracking The US Business Cycle With A Singular Spectrum Analysis

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Executive Summary

The monitoring of economic developments is an exercise of considerable importance for policymakers, namely, central banks and fiscal authorities as well as for other economic agents such as financial intermediaries, firms and households. However, the assessment of the business cycle is not an easy endeavor as the cyclical component is not an observable variable. In this paper the author resorts to singular spectrum analysis in order to disentangle the US GDP into several underlying components of interest. The business cycle indicator yielded through this method is shown to bear a resemblance with band-pass filtered output.

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