Common features and output fluctuations in the United Kingdom

In this paper we use a new methodology due to Engle and Kozicki (Journal of Business and Economic Statistics, 1993, 11, 369-380) to test whether sectors have common cycles. More specifically, we interpret common serial correlation features as common cycles, where a feature is said to be common if a linear combination of the series fails to have the feature even though each of the series individually has it. By using a simple time-series model of output fluctuations to represent business cycle features, we show that in the United Kingdom there is no tendency of fluctuations in economic activity to synchronize across sectors. The importance of using sectoral data to study the sources of economic fluctuations is confirmed by our findings.