European business cycles: New indices and their synchronicity

This article presents a new business cycle index that allows for cycle-to-cycle comparisons of the depth of recessions within a country, cross-country comparisons of business cycle correlation, and simple aggregation to arrive at a measure of a European business cycle. The data augmentation implied by Gibbs sampling generates posterior distributions for a latent coincident business cycle index. Subsample correlations between an aggregated "Europe" index and the national business cycle indices from France, Germany, and Italy are consistent with the claim that the European economies are becoming more harmonized.