Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/198821 
Authors: 
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 7461
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Hamilton (2018) suggests that the Kilian (2009) index of global real economic activity is misleading and calls for alternative measures. The problem documented by Hamilton is a consequence of a coding mistake. Specifically, the index of nominal freight rates underlying the Kilian index was accidentally logged twice. Once this coding error is corrected by removing one of the log transformations, none of the concerns raised by Hamilton remains valid and the index may be used as originally intended. Moreover, it can be shown that the corrected index differs only slightly from the original index and that the key empirical results in Kilian (2009) and related studies remain unchanged when replacing the index.
Subjects: 
global business cycle
shipping
commodity market
oil
log transformation
JEL: 
Q31
Q43
Document Type: 
Working Paper
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