We propose a chronology for the business cycles in Colombia following the NBER classic notion; that is, dates of peaks and troughs of economic activity are estimated without decomposing the series used in their transitory and permanent components. The estimated chronology suggests that the four complete cycles that occurred between 1975 and 2011 are asymmetric and have an approximate duration of 6.8 years. Expansions lasted, on average, 5.4 years while contractions took about 1.3 years. These results are derived from the application of a cumulative diffusion index to 41 series of economic activity.
This paper describes the construction of a new monthly leading indicator of economic activity in Colombia (IMACO). The procedure is based on a search algorithm that selects an optimal group of seven leading variables so that the composite indicator anticipates GDP movements five months in advance and with a 93 % correlation. Also, the IMACO has others desirables predictive properties: it anticipates the break points in the Colombian business cycle without giving any wrong signals, and minimizes the forecast errors on GDP growth. Due to its simplicity and low computational cost, the IMACO indicator offers a tool for the continuous monitoring of the economic activity and economic policy design, and can be replicated for other macroeconomic aggregates in Colombia and also applied in other Latin-American countries.
Policy makers usually require estimates of the performance of economic activity in real time. However, the information used is only available at the level of hard indicators and opinion polls, which usually have different frequencies and publication lags, in addition to idiosyncratic shocks. In this paper, we adapt Camacho and Perez-Quiros (2009-2010) forecasting schemes that produce estimates of GDP growth in real time for the Colombian economy. The adapted dynamic factors model involves economic series of different frequency, availability and origin, used with the information available at the time of each publication. The forecast evaluation suggests that the model presents a better performance against other reference schemes, and that the accuracy of the forecasts increases when we include the flow of information in real time of the activity indicators.