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New EuroCOIN: Tracking Economic Growth in Real Time

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Author Info
Altissimo, Filippo
Cristadoro, Riccardo
Forni, Mario
Lippi, Marco
Veronese, Giovanni

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Abstract

This paper presents ideas and methods underlying the construction of an indicator that tracks euro area GDP growth but, unlike GDP growth, (i) is updated monthly and almost in real time, and (ii) is free from short-run dynamics. Removal of short-run dynamics from a time series to isolate the medium to long-run component can be obtained by a band-pass filter. However, it is well known that band-pass filters, being two-sided, perform very poorly at the end of the sample. New EuroCOIN is an estimator of the medium to long-run component of GDP that only uses contemporaneous values of a large panel of macroeconomic time series, so that no end-of-sample deterioration occurs. Moreover, as our dataset is monthly, New EuroCOIN can be updated each month and with a very short delay. Our method is based on generalized principal components that are designed to use leading variables in the dataset as proxies for future values of GDP growth. As the medium to long-run component of GDP is observable, although with delay, the performance of New EuroCOIN at the end of the sample can be measured.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5633.

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Date of creation: Apr 2006
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Handle: RePEc:cpr:ceprdp:5633

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Related research
Keywords: band-pass filter; coincident index; generalized principal components; large dataset factor models;

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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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Full references

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. Massimiliano Marcellino & Christian Schumacher, 2008. "Factor-MIDAS for Now- and Forecasting with Ragged-Edge Data: A Model Comparison for German GDP1," Working Papers 333, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
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  2. Riccardo Cristadoro & Fabrizio Venditti & Giuseppe Saporito, 2008. "Forecasting inflation and tracking monetary policy in the euro area - does national information help?," Working Paper Series 900, European Central Bank. [Downloadable!]
    Other versions:
  3. Marta Banbura & Gerhard Rünstler, 2007. "A look into the factor model black box - publication lags and the role of hard and soft data in forecasting GDP," Working Paper Series 751, European Central Bank. [Downloadable!]
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  8. Maximo Camacho & Gabriel Perez-Quiros, 2008. "Introducing the EURO-STING: Short Term INdicator of Euro Area Growth," Banco de España Working Papers 0807, Banco de España. [Downloadable!]
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