The Dutch Business Cycle: Which Indicators Should We Monitor?

Abstract

In this study we construct a business cycle indicator for the Netherlands. The Christiano-Fitzgerald band-pass .lter is employed to isolate the cycle using the de.nition of business cycle frequencies as waves with lengths longer than 3 years and shorter than 11 years. The main advantage of band-pass .ltering is the unambiguous concept of a business cycle, to which the .ltered approximation will eventually converge as more and more observations become available. The coincident business cycle index is based on industrial production, household consumption and sta¢ ng employment. These three variables represent key macroeconomic developments, which are also analysed by both the CEPR and NBER dating committees. For the indicator to be useful in practice, a timely update and therefore a limited publication delay is a crucial constraint. The composite leading index consists of eleven indicators representing di¤erent sectors in the economy: three .nancial series, four business and consumer surveys and four real activity variables, of which two supply- and two demand-related.

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