Intertemporal Similarity of Economic Time Series
An Application of Dynamic Time Warping
This paper adapts the non-parametric Dynamic Time Warping (DTW) technique in an application to examine the temporal alignment and similarity across economic time series. DTW has important advantages over existing measures in economics as it alleviates concerns regarding a pre-defined fixed temporal alignment of series. For example, in contrast to current methods, DTW can capture alternations between leading and lagging relationships of series. We illustrate DTW in a study of US states’ business cycles around the Great Recession, and find considerable evidence that temporal alignments across states dynamic. Trough cluster analysis, we further document state-varying recoveries from the recession.
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|Econometric Institute Research Papers|
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Franses, Ph.H.B.F, & Wiemann, T. (2018). Intertemporal Similarity of Economic Time Series (No. EI2018-30). Econometric Institute Research Papers. Retrieved from http://hdl.handle.net/1765/109916