Page - 65 - in The Austrian Business Cycle in the European Context

65 most reliable economic information for the euro area is only avail- able on a quarterly basis. Most interestingly, the CEPR concentrates on growth rates. The in- terpretation of growth rates makes a dating procedure not only sensitive to superimposed error terms (making such dating a poor guide for policy interventions), but also mixes up trend and cycle movements. From a theoretical point of view, it makes a decisive difference whether slow growth results from a gradually sloping trend or a sharp fall in the business cycle. 6.2 The Bry-Boschan routine The best-known methodical approach is the algorithm proposed by the NBER economists Bry - Boschan ( 1971). This non-parametric method can be applied to seasonally-adjusted trended as well as de-trended monthly time series and tracks quite well turning points for the US as set by the NBER Business Cycle Dating Committee. This approach starts with a possibly necessary de-trending proce- dure and the removal of outliers according to some standard de- viation criterion. Subsequently, a sequence of smoothing filters is applied, each followed by running the dating procedure. The smoothing process starts with the filter performing the highest de- gree of smoothness and goes down consecutively till the original (unsmoothed) time series is dated. The final turning points are dated on the basis of the original series, but must be consistent with all earlier dates according to the smoothed series. The spe- cific points are found by checking for local minima and maxima and imposing some criteria for the minimum length of phases and cycles between them. If two or more peaks (or troughs) follow each other, then only the highest (deepest) one enters the dating output. Disadvantages of the Bry-Boschan routine are that only the alter- nation of turning point signs and the phase-length impose restric-