A graphical approach to business cycle analysis

Factor analysis applied to monthly questions of the Ifo Business Survey yields important insights into existing interdependencies among these variables. In a restructuring process some new interpretable economic facors were derived from the original business survey variables to attain a better understanding of economic fluctuations. With a graphical representation of the analytical results in a two-dimensional space, new tools for empirical research - a quantity/price diagramm and an assessment/expectation portfolio - were developed revealing business cycle phenomena of western and also eastern Germany in an unusual but easy fashion.