A Wavelet-Based Approach to Filter Out Symmetric Macroeconomic Shocks
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We propose a novel method for econometric time series analysis. This method acts as the comovement-selective filter and is useful to filter out the cycles that are caused by an global event present in the reference time series. We demonstrate its applicability on removing symmetric macroeconomic shock caused by recent financial crisis from the business cycle of the euro area according to the comovement with the United States. The application allowing to identify the country specific business cycles in the Visegrad countries data using the comovement with Germany is also presented. The method is based on the continuous wavelet transform, its inverse and the comovement measurement in the time-frequency domain. Its application also enables to uncover detailed development of the business cycle synchronization in time.
KeywordsWavelet transform Filters Comovement Macroeconomic shocks
This research was a part of the Czech Science Foundation grant No. P402/11/0570 with partial support of the internal FEKT-S-11-12 project. The simulations were performed in the laboratories of the SIX research center, Reg. No. CZ.1.05/2.1.00/03.0072 built up with aid of CZ.1.07/2.3.00/20.0007 WICOMT project. Support of the Jean Monnet Multilateral Research Group Grant No. 530069-LLP-1-2012-1-CZ-AJM-RE is also acknowledged.
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