Advanced Search
MyIDEAS: Login to save this article or follow this journal

New Eurocoin: Tracking Economic Growth in Real Time

Contents:

Author Info

  • Filippo Altissimo

    (Brevan Howard Asset Management)

  • Riccardo Cristadoro

    (Bank of Italy)

  • Mario Forni

    (Università di Modena e Reggio Emilia, CEPR, and RECent)

  • Marco Lippi

    (Università di Roma 'La Sapienza')

  • Giovanni Veronese

    (Bank of Italy)

Abstract

Removal of short-run dynamics from a stationary time series to isolate the medium- to long-run component can be obtained by a bandpass filter. However, bandpass filters are infinite moving averages and can therefore deteriorate at the end of the sample. This is a well-known result in the literature isolating the business cycle in integrated series. We show that the same problem arises with our application to stationary time series. In this paper, we develop a method to obtain smoothing of a stationary time series by using only contemporaneous values of a large data set, so that no end-of-sample deterioration occurs. Our method is applied to the construction of New Eurocoin, an indicator of economic activity for the euro area, which is an estimate, in real time, of the medium- to long-run component of GDP growth. As our data set is monthly and most of the series are updated with a short delay, we are able to produce a monthly real-time indicator. As an estimate of the medium- to long-run GDP growth, Eurocoin performs better than the bandpass filter at the end of the sample in terms of both fitting and turning-point signaling. (c) 2010 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00045
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 92 (2010)
Issue (Month): 4 (November)
Pages: 1024-1034

as in new window
Handle: RePEc:tpr:restat:v:92:y:2010:i:4:p:1024-1034

Contact details of provider:
Web page: http://mitpress.mit.edu/journals/

Order Information:
Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Filippo Altissimo & Antonio Bassanetti & Riccardo Cristadoro & Mario Forni & Marco Lippi & Lucrezia Reichlin & Giovanni Veronese, 2001. "A real time coincident indicator of the euro area business cycle," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 436, Bank of Italy, Economic Research and International Relations Area.
  2. Ben S. Bernanke & Jean Boivin, 2001. "Monetary Policy in a Data-Rich Environment," NBER Working Papers 8379, National Bureau of Economic Research, Inc.
  3. Pesaran, M Hashem & Timmermann, Allan, 1992. "A Simple Nonparametric Test of Predictive Performance," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 10(4), pages 561-65, October.
  4. Boivin, Jean & Ng, Serena, 2005. "Understanding and Comparing Factor-Based Forecasts," MPRA Paper 836, University Library of Munich, Germany.
  5. Forni, Mario & Hallin, Marc & Lippi, Marco & Reichlin, Lucrezia, 2002. "The Generalized Dynamic Factor Model: One-Sided Estimation and Forecasting," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3432, C.E.P.R. Discussion Papers.
  6. M. Hashem Pesaran & Allan Timmermann, 2006. "Testing Dependence among Serially Correlated Multi-category Variables," CESifo Working Paper Series, CESifo Group Munich 1770, CESifo Group Munich.
  7. Riccardo Cristadoro & Mario Forni & Lucrezia Reichlin & Giovanni Veronese, 2005. "A core inflation indicator for the Euro area," ULB Institutional Repository, ULB -- Universite Libre de Bruxelles 2013/10131, ULB -- Universite Libre de Bruxelles.
  8. Marianne Baxter & Robert G. King, 1995. "Measuring Business Cycles Approximate Band-Pass Filters for Economic Time Series," NBER Working Papers 5022, National Bureau of Economic Research, Inc.
  9. Mario Forni & Marc Hallin & Lucrezia Reichlin & Marco Lippi, 2000. "The generalised dynamic factor model: identification and estimation," ULB Institutional Repository, ULB -- Universite Libre de Bruxelles 2013/10143, ULB -- Universite Libre de Bruxelles.
  10. Zarnowitz, Victor & Ozyildirim, Ataman, 2006. "Time series decomposition and measurement of business cycles, trends and growth cycles," Journal of Monetary Economics, Elsevier, Elsevier, vol. 53(7), pages 1717-1739, October.
  11. Lucrezia Reichlin & Mario Forni & Marc Hallin & Marco Lippi, 2001. "Coincident and leading indicators for the Euro area," ULB Institutional Repository, ULB -- Universite Libre de Bruxelles 2013/10137, ULB -- Universite Libre de Bruxelles.
  12. Lawrence J. Christiano & Terry J. Fitzgerald, 1999. "The Band Pass Filter," NBER Working Papers 7257, National Bureau of Economic Research, Inc.
  13. Martin D.D. Evans, 2005. "Where Are We Now? Real-Time Estimates of the Macro Economy," NBER Working Papers 11064, National Bureau of Economic Research, Inc.
  14. Forni, Mario & Lippi, Marco, 2001. "The Generalized Dynamic Factor Model: Representation Theory," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 17(06), pages 1113-1141, December.
  15. Jushan Bai & Serena Ng, 2000. "Determining the Number of Factors in Approximate Factor Models," Boston College Working Papers in Economics, Boston College Department of Economics 440, Boston College Department of Economics.
  16. Stock J.H. & Watson M.W., 2002. "Forecasting Using Principal Components From a Large Number of Predictors," Journal of the American Statistical Association, American Statistical Association, American Statistical Association, vol. 97, pages 1167-1179, December.
  17. Antonello D’ Agostino & Domenico Giannone, 2012. "Comparing Alternative Predictors Based on Large‐Panel Factor Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 74(2), pages 306-326, 04.
  18. Mario Forni & Marc Hallin & Marco Lippi & Lucrezia Reichlin, 2004. "The generalised dynamic factor model: consistency and rates," ULB Institutional Repository, ULB -- Universite Libre de Bruxelles 2013/10133, ULB -- Universite Libre de Bruxelles.
  19. James H. Stock & Mark W. Watson, 1998. "Business Cycle Fluctuations in U.S. Macroeconomic Time Series," NBER Working Papers 6528, National Bureau of Economic Research, Inc.
  20. Dedola, Luca & Neri, Stefano, 2006. "What does a technology shock do? A VAR analysis with model-based sign restrictions," Working Paper Series, European Central Bank 0705, European Central Bank.
  21. Chow, Gregory C & Lin, An-loh, 1971. "Best Linear Unbiased Interpolation, Distribution, and Extrapolation of Time Series by Related Series," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 53(4), pages 372-75, November.
  22. Eric Ghysels & Arthur Sinko & Rossen Valkanov, 2007. "MIDAS Regressions: Further Results and New Directions," Econometric Reviews, Taylor & Francis Journals, Taylor & Francis Journals, vol. 26(1), pages 53-90.
  23. Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 20(2), pages 147-62, April.
  24. Jushan Bai, 2003. "Inferential Theory for Factor Models of Large Dimensions," Econometrica, Econometric Society, Econometric Society, vol. 71(1), pages 135-171, January.
  25. Giannone, Domenico & Reichlin, Lucrezia & Sala, Luca, 2002. "Tracking Greenspan: Systematic and Unsystematic Monetary Policy Revisited," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3550, C.E.P.R. Discussion Papers.
  26. Hallin, Marc & Liska, Roman, 2007. "Determining the Number of Factors in the General Dynamic Factor Model," Journal of the American Statistical Association, American Statistical Association, American Statistical Association, vol. 102, pages 603-617, June.
  27. Stock, J.H. & Watson, M.W., 1989. "New Indexes Of Coincident And Leading Economic Indicators," Papers, Harvard - J.F. Kennedy School of Government 178d, Harvard - J.F. Kennedy School of Government.
  28. Diebold, Francis X & Mariano, Roberto S, 1995. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 13(3), pages 253-63, July.
  29. Fagan, Gabriel & Henry, Jérôme & Mestre, Ricardo, 2001. "An area-wide model (AWM) for the euro area," Working Paper Series, European Central Bank 0042, European Central Bank.
  30. Valle e Azevedo, Joao & Koopman, Siem Jan & Rua, Antonio, 2006. "Tracking the Business Cycle of the Euro Area: A Multivariate Model-Based Bandpass Filter," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 24, pages 278-290, July.
  31. Filippo Altissimo & Antonio Bassanetti & Riccardo Cristadoro & Lucrezia Reichlin & Giovanni Veronese, 2001. "The construction of coincident and leading indicators for the euro area business cycler of the euro area business cycle," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 434, Bank of Italy, Economic Research and International Relations Area.
  32. Kapetanios, George & Marcellino, Massimiliano, 2006. "A Parametric Estimation Method for Dynamic Factor Models of Large Dimensions," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5620, C.E.P.R. Discussion Papers.
  33. James Mitchell & Richard J. Smith & Martin R. Weale & Stephen Wright & Eduardo L. Salazar, 2005. "An Indicator of Monthly GDP and an Early Estimate of Quarterly GDP Growth," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(501), pages F108-F129, 02.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:92:y:2010:i:4:p:1024-1034. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karie Kirkpatrick).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.