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The construction of coincident and leading indicators for the euro area business cycler of the euro area business cycle

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Author Info
Filippo Altissimo () (Bank of Italy, Economic Research Department and CEPR)
Antonio Bassanetti () (Bank of Italy, Economic Research Department)
Riccardo Cristadoro () (Bank of Italy, Economic Research Department)
Lucrezia Reichlin () (Université Libre de Bruxelles, ECARES and CEPR)
Giovanni Veronese () (Bank of Italy, Economic Research Department)

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Abstract

This paper investigates the business cycle properties of the euro area and computes a coincident and a leading indicator of economic activity. We accomplish this by applying the newly introduced generalized factor model to a properly constructed and harmonized data set of short term statistics of the euro area (794 monthly series). Unlike other methods used in the literature, the procedure takes into consideration the cross-country as well as the withincountry correlation structure and exploits all information on dynamic cross-correlations. As a byproduct of our analysis, we provide a characterization of the commonality and dynamic relations of the series in the data set with respect to the coincident indicator and a dating of the euro area cycle.

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Paper provided by Bank of Italy, Economic Research Department in its series Temi di discussione (Economic working papers) with number 434.

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Date of creation: Dec 2001
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Handle: RePEc:bdi:wptemi:td_434_01

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Related research
Keywords: business cycle; dynamic factor model;

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Find related papers by JEL classification:
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General

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  1. Beaulieu, J Joseph & MacKie-Mason, Jeffrey K & Miron, Jeffrey A, 1992. "Why Do Countries and Industries with Large Seasonal Cycles also Have Large Business Cycles?," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 621-56, May. [Downloadable!] (restricted)
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  2. Artis, M. & Krolzig, H.-M. & Toro, J., 1999. "The European Business Cycle," Economics Working Papers eco99/24, European University Institute.
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  3. Forni, Mario & Reichlin, Lucrezia, 2001. "Federal policies and local economies: Europe and the US," European Economic Review, Elsevier, vol. 45(1), pages 109-134, January. [Downloadable!] (restricted)
  4. Marcellino, Massimiliano & Stock, James H. & Watson, Mark W., 2003. "Macroeconomic forecasting in the Euro area: Country specific versus area-wide information," European Economic Review, Elsevier, vol. 47(1), pages 1-18, February. [Downloadable!] (restricted)
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  5. Andrew Dickerson & Heather Gibson & Euclid Tsakalotos, 1998. "Business Cycle Correspondence in the European Union," Empirica, Springer, vol. 25(1), pages 49-75, January. [Downloadable!] (restricted)
  6. C. John McDermott & Alasdair Scott, 2000. "Concordance in Business Cycles," IMF Working Papers 00/37, International Monetary Fund.
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  7. Eswar Prasad & Robin L. Lumsdaine, 1999. "Identifying the Common Component in International Economic Fluctuations - A New Approach," IMF Working Papers 99/154, International Monetary Fund.
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Cited by:
(explanations, 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.)

  1. Paolo Angelini, 2002. "Liquidity and Announcement Effects in the Euro Area," Temi di discussione (Economic working papers) 451, Bank of Italy, Economic Research Department. [Downloadable!]
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  2. Silvia Magri, 2002. "Italian households' debt: determinants of demand and supply," Temi di discussione (Economic working papers) 454, Bank of Italy, Economic Research Department. [Downloadable!]
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