An Analysis Of The Embedded Frequency Content Of Macroeconomic Indicators And Their Counterparts Using The Hilbert-Huang Transform
Source: Bank of Finland
Many indicators of business and growth cycles have been constructed by both private and public agencies and are now in use as monitoring devices of economic conditions and for forecasting purposes. As these indicators are largely composite constructs using other economic data, their frequency composition is likely different to that of the variables they are used as indicators for. In this paper the authors use the Hilbert-Huang transform, which comprises the Empirical Mode Decomposition (EMD) and the Hilbert spectrum, in order to analyse the frequency content of comparable OECD confidence indicators and national sentiment indicators for industrial production and consumption. They then compare these with the frequency content of both industrial production and real consumption growth data.