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A real time coincident indicator 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)

  • Mario Forni

    (Università di Modena and CEPR)

  • Marco Lippi

    (Università di Roma, La Sapienza and CEPR)

  • Lucrezia Reichlin

    ()
    (Université Libre de Bruxelles, ECARES and CEPR)

  • Giovanni Veronese

    ()
    (Bank of Italy, Economic Research Department)

Abstract

This paper is the result of the Bank of Italy-CEPR project to construct a monthly coincident indicator of the business cycle of the euro area. The index is estimated on the basis of a harmonized data set of monthly statistics of the euro area (951 series) which we constructed from a variety of sources. We use the information of this large panel to obtain an indicator which has three characteristics: (i) it provides real time information on monthly coincident activity since it is updated as new information become available in a non-synchronous way; (ii) it is cleaned from noise originated from measurement error and idiosyncratic national and sectoral dynamics; (iii) it is cleaned from seasonal and short-run dynamics through a Þlter that requires very little revision at the end of the sample. Unlike other methods used in the literature, the procedure takes into consideration the cross-country as well as the within-country 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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File URL: http://www.bancaditalia.it/pubblicazioni/econo/temidi/td01/td436_01/td436/tema_436_01.pdf
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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 436.

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Date of creation: Dec 2001
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Handle: RePEc:bdi:wptemi:td_436_01

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Web page: http://www.bancaditalia.it
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Keywords: business cycle; dynamic factor model;

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