Alternative Methodology for Turning-Point Detection in Business Cycle : A Wavelet Approach

Peter Martey Addo; Monica Billio; Dominique Guegan

halshs-00694420, version 1

Alternative Methodology for Turning-Point Detection in Business Cycle : A Wavelet Approach

Peter Martey Addo ( Author to contact preferably ) ^1, 2, Monica Billio () ², Dominique Guegan (, ) ^1, 3

Documents de travail du Centre d'Economie de la Sorbonne 2012.23 - ISSN : 1955-611X (2012)

Abstract: We provide a signal modality analysis to characterize and detect nonlinearity schemes in the US Industrial Production Index time series. The analysis is achieved by using the recently proposed 'delay vector variance ' (DVV) method, which examines local predictability of a signal in the phase space to detect the presence of determinism and nonlinearity in a time series. Optimal embedding parameters used in the DVV analysis are obtained via a differential entropy based method using wavelet-based surrogates. A complex Morlet wavelet is employed to detect and characterize the US business cycle. A comprehensive analysis of the feasibility of this approach is provided. Our results coincide with the business cycles peaks and troughs dates published by the National Bureau of Economic Research (NBER).

1: Centre d'économie de la Sorbonne (CES)
CNRS : UMR8174 – Université Paris I - Panthéon-Sorbonne
2: Università Ca' Foscari of Venice
Department of Economics
3: Ecole d'Économie de Paris - Paris School of Economics (EEP-PSE)
Ecole d'Économie de Paris

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From: Lucie Label <>
Submitted on: Friday, 4 May 2012 11:12:27
Updated on: Wednesday, 9 May 2012 16:49:49

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%F halshs-00694420, version 1
%0 Unpublished Work
%U http://halshs.archives-ouvertes.fr/halshs-00694420
%T Alternative Methodology for Turning-Point Detection in Business Cycle : A Wavelet Approach
%A Addo, Peter Martey
%A Billio, Monica
%A Guegan, Dominique
%+ Centre d'économie de la Sorbonne - CES , Università Ca' Foscari of Venice , Ecole d'Économie de Paris - Paris School of Economics - EEP-PSE
%Z Axe Finance
%G English
%X We provide a signal modality analysis to characterize and detect nonlinearity schemes in the US Industrial Production Index time series. The analysis is achieved by using the recently proposed 'delay vector variance ' (DVV) method, which examines local predictability of a signal in the phase space to detect the presence of determinism and nonlinearity in a time series. Optimal embedding parameters used in the DVV analysis are obtained via a differential entropy based method using wavelet-based surrogates. A complex Morlet wavelet is employed to detect and characterize the US business cycle. A comprehensive analysis of the feasibility of this approach is provided. Our results coincide with the business cycles peaks and troughs dates published by the National Bureau of Economic Research (NBER).
%X Nous proposons une analyse de la série indice de Production industrielle en nous basant sur la méthode DVV qui examine la prédictabilité locale d'un signal dans l'espace des phases. Ensuite une étude faite à l'aide de l'ondelette de Morlet permet de détecter et de caractériser le cycle des affaires USA. Une analyse complète de la faisabilité de cette double approche est fournie. Nos résultats coïncident avec les datations des cycles économiques de pics et des creux publiés par le Bureau National de la Recherche Economique (NBER) sur la période étudiée.
%2 SHS:ECO;SHS:GESTION;SHS:STAT;MATH:MATH_PR;MATH:MATH_ST;STAT:TH
%8 2012-04-00
%Z Documents de travail du Centre d'Economie de la Sorbonne 2012.23 - ISSN : 1955-611X
%K Nonparametric methods, STAR models, business cycles.
%K Méthodes non paramétriques, modèle STAR, cycles d'activité.
%2 C - Mathematical and Quantitative Methods/C1 - Econometric and Statistical Methods: General/C14 - Semiparametric and Nonparametric Methods, C - Mathematical and Quantitative Methods/C2 - Single Equation Models; Single Variables/C22 - Time-Series Models; Dynamic Quantile Regressions , C - Mathematical and Quantitative Methods/C4 - Econometric and Statistical Methods: Special Topics/C40 - General, E - Macroeconomics and Monetary Economics/E3 - Prices, Business Fluctuations, and Cycles/E32 - Business Fluctuations; Cycles
%Z URL des Documents de travail : http://centredeconomiesorbonne.univ-paris1.fr/bandeau-haut/documents-de-travail/

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