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EuroCOIN: A Real Time Coincident Indicator of the Euro Area Business Cycle

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Author Info

  • Altissimo, Filippo
  • Bassanetti, Antonio
  • Cristadoro, Riccardo
  • Forni, Mario
  • Hallin, Marc
  • Lippi, Marco
  • Reichlin, Lucrezia
  • Veronese, Giovanni

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 filter 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 by product 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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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3108.

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Date of creation: Dec 2001
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Handle: RePEc:cpr:ceprdp:3108

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Keywords: business cycle; dynamic factor model;

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References

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  1. James H. Stock & Mark W. Watson, 1989. "New Indexes of Coincident and Leading Economic Indicators," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 351-409 National Bureau of Economic Research, Inc.
  2. Lawrence J. Christiano & Terry J. Fitzgerald, 1999. "The Band pass filter," Working Paper 9906, Federal Reserve Bank of Cleveland.
    • Lawrence J. Christiano & Terry J. Fitzgerald, 2003. "The Band Pass Filter," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 435-465, 05.
  3. Yin-Wong Cheung & Frank Westermann, 2002. "Output dynamics of the G7 countries--stochastic trends and cyclical movements," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 34(18), pages 2239-2247.
  4. 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.
  5. Victor Gómez & Agustín Maravall, 1996. "Programs TRAMO and SEATS, Instruction for User (Beta Version: september 1996)," Banco de Espa�a Working Papers 9628, Banco de Espa�a.
  6. Thomas J. Sargent & Christopher A. Sims, 1977. "Business cycle modeling without pretending to have too much a priori economic theory," Working Papers, Federal Reserve Bank of Minneapolis 55, Federal Reserve Bank of Minneapolis.
  7. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
  8. C John McDermott & Alasdair Scott, 1999. "Concordance in business cycles," Reserve Bank of New Zealand Discussion Paper Series G99/7, Reserve Bank of New Zealand.
  9. 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.
  10. Forni, Mario & Lippi, Marco, 2001. "The Generalized Dynamic Factor Model: Representation Theory," Econometric Theory, Cambridge University Press, vol. 17(06), pages 1113-1141, December.
  11. Forni, Mario & Hallin, Marc & Lippi, Marco & Reichlin, Lucrezia, 1999. "The Generalized Dynamic Factor Model: Identification and Estimation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2338, C.E.P.R. Discussion Papers.
  12. 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.
  13. Robin L. Lumsdaine & Eswar S. Prasad, 1997. "Identifying the Common Component in International Economic Fluctuations," NBER Working Papers 5984, National Bureau of Economic Research, Inc.
  14. James H. Stock & Mark W. Watson, 1998. "Diffusion Indexes," NBER Working Papers 6702, National Bureau of Economic Research, Inc.
  15. Andrew Dickerson & Heather Gibson & Euclid Tsakalotos, 1998. "Business Cycle Correspondence in the European Union," Empirica, Springer, Springer, vol. 25(1), pages 49-75, January.
  16. Artis, Michael J & Krolzig, Hans-Martin & Toro, Juan, 1999. "The European Business Cycle," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2242, C.E.P.R. Discussion Papers.
  17. Lucrezia Reichlin & Mario Forni & Marc Hallin & Marco Lippi, 2001. "Coincident and leading indicators for the Euro area," ULB Institutional Repository 2013/10137, ULB -- Universite Libre de Bruxelles.
  18. 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.
  19. repec:fth:baesse:9628 is not listed on IDEAS
  20. Zarnowitz, Victor, 1992. "Business Cycles," National Bureau of Economic Research Books, University of Chicago Press, number 9780226978901, March.
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