Business cycle clocks: Time to get circular

The article presents a novel approach to represent business cycle momentum using circular statistics, which allows for a dynamic and comprehensive visualization of economic cycles. It highlights the advantages of circular statistics in handling large datasets and provides empirical evidence of its effectiveness through an application to the four major euro area economies. The method is shown to track business cycles accurately and deliver reliable signals on economic turning points, outperforming alternative methods such as the median direction and factor models. The article also demonstrates the usefulness of the circular business cycle clock in a quasi-real-time framework and its applicability to tracking both growth and classical business cycles. The findings are supported by cross-country results, reinforcing the overall usefulness and reliability of the proposed approach.