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Eurocoin: A Real Time Coincident Indicator Of The Euro Area Business Cycle

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  • Mario Forno
  • Marco Lippi
  • Lucrezia Reichlin
  • Filippo Altissimo
  • Antonio Bassanetti

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 Society for Computational Economics in its series Computing in Economics and Finance 2003 with number 242.

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Date of creation: 01 Aug 2003
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Handle: RePEc:sce:scecf3:242

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Keywords: Business cycle indicator; Factor models;

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References

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  1. 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.
  2. 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.
  3. Lawrence J. Christiano & Terry J. Fitzgerald, 1999. "The Band Pass Filter," NBER Working Papers 7257, National Bureau of Economic Research, Inc.
  4. Mike Artis & Hans-Martin Krolzig & Juan Toro, 2002. "The European Business Cycle," Economic Working Papers at Centro de Estudios Andaluces E2002/19, Centro de Estudios Andaluces.
  5. 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.
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  7. 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.
  8. Mario Forni & Marc Hallin & Lucrezia Reichlin & Marco Lippi, 2000. "The generalised dynamic factor model: identification and estimation," ULB Institutional Repository 2013/10143, ULB -- Universite Libre de Bruxelles.
  9. 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.
  10. Yin-Wong Cheung & Frank Westermann, 1999. "Output Dynamics of the G7 Countries - Stochastic Trends and Cyclical Movements," CESifo Working Paper Series 220, CESifo Group Munich.
  11. Forni, Mario, et al, 2001. "Coincident and Leading Indicators for the Euro Area," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 111(471), pages C62-85, May.
  12. Forni, Mario & Reichlin, Lucrezia, 2001. "Federal policies and local economies: Europe and the US," European Economic Review, Elsevier, Elsevier, vol. 45(1), pages 109-134, January.
  13. 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.
  14. 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.
  15. Zarnowitz, Victor, 1992. "Business Cycles," National Bureau of Economic Research Books, University of Chicago Press, number 9780226978901.
  16. Massimiliano Marcellino & James H. Stock & Mark W. Watson, . "Macroeconomic Forecasting in the Euro Area: Country Specific versus Area-Wide Information," Working Papers 201, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  17. Forni M. & Hallin M., 2003. "The Generalized Dynamic Factor Model: One-Sided Estimation and Forecasting," Computing in Economics and Finance 2003, Society for Computational Economics 143, Society for Computational Economics.
  18. Andrew Dickerson & Heather Gibson & Euclid Tsakalotos, 1998. "Business Cycle Correspondence in the European Union," Empirica, Springer, Springer, vol. 25(1), pages 49-75, January.
  19. James H. Stock & Mark W. Watson, 1998. "Diffusion Indexes," NBER Working Papers 6702, National Bureau of Economic Research, Inc.
  20. 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.
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