Page - 53 - in The Austrian Business Cycle in the European Context

53 cle, if not lagging78, which distorts the exact dating of the business cycle. In view of such considerations, the gross value added in real terms excluding agriculture (GVAex) was chosen as the reference series, instead of GDP. This means that the business cycle frequencies discovered in this aggregate are assumed to be the most suitable measure of the business cycle for Austria, and dating results for all other series are interpreted in relation to this reference series. A large number of studies use the industrial production index as an ad-hoc basis for measuring the business cycle. Whereas this ap- proach has the major advantage of offering long time series at a monthly frequency, this is not the kind of business cycle Burns - Mitchell ( 1946) had in mind. According to their definition, the busi- ness cycle shows up in aggregate economic activity and not only in industrial production. The univariate ad-hoc determination of the time series which car- ries most of the business cycle variations is probably the most widely used approach. Studies based on modelling techniques rely heavily on this kind of business cycle determination. There are several studies using multivariate models in business cycle analy- sis79, but they are only multivariate in looking at several countries to extract the business cycle by measuring common trends or com- mon cycles directly. But for all of these countries, one type of time series is chosen ad-hoc as being most appropriate for business cy- cle analysis. 78 National accounts regulations and recommendations require the recording of tax revenues for GDP purposes not on a cash basis, but to adjust them at an ac- crual basis. If this is done properly, such kind of taxes are at best coincident as a lead seems to be rather implausible for them. In practice however, lagged cash revenues are used which potentially shift included business cycle variations in time. 79 Examples are the multivariate unobserved component model proposed by Artis -Marcellino - Proietti (2004) or Cheung - Westerman (1999), who estimated in a multivariate manner the common trend for the industrial production of Austria and Germany.