Why doesn’t the Committee accept the two-quarter definition?
The Committee’s procedure for identifying turning points differs from the two-quarter rule in a number of ways.
Recall that our definition includes the phrase, “a significant decline in activity.” Isn’t a recession a period of diminished economic activity?
See Methodology Does CEPR use a different approach to NBER?
See The CEPR and NBER Approaches What data does the Committee use?
A: The Committee wants to ensure that its characterization of Euro-area economic activity (which is its sole objective) is not affected by rising heterogeneity in the Euro-area.
Note that since October 2012 the Committee has dropped its requirement that peaks or troughs mark turning points in economic activity in countries of the euro area.
While the CEPR Euro Area Business Cycle Dating Committee has been conceived to operate in a manner similar to the NBER Business Cycle Dating Committee, its deliberations and timing of announcements are independent. The Director of CEPR appoints new members after consultation with the Chair of the Business Cycle Dating Committee and the Research Director of CEPR.
The President and the Research Director are ex officio members of the Committee.
A detailed analysis of heterogeneity in individual countries' business cycles is included in the Committee's releases since its creation.
Q: Is it possible that the EU area is in a recession while some of the individual countries are not?
We identify a quarter when the economy reached a peak of activity (P) and a later quarter (TP) when the economy reached a trough.
The quarters P 1 to T (with P 1 and T included) constitute a recession, a period when economic activity is contracting. How long does the Committee expect the recession to last? Does the Committee follow the NBER Business Cycle Dating Committee in its deliberations?
It is thus possible that the EU-area is in a recession while some of the individual countries are not, and that the business cycle dates differ for the Euro-area and for individual countries.