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A real time coincident indicator of the euro area business cycle

Author

Listed:
  • 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

    (Universit� di Modena and CEPR)

  • Marco Lippi

    (Universit� di Roma, La Sapienza and CEPR)

  • Lucrezia Reichlin

    () (Universit� 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 �lter 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.

Suggested Citation

  • Filippo Altissimo & Antonio Bassanetti & Riccardo Cristadoro & Mario Forni & Marco Lippi & Lucrezia Reichlin & Giovanni Veronese, 2001. "A real time coincident indicator of the euro area business cycle," Temi di discussione (Economic working papers) 436, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_436_01
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    More about this item

    Keywords

    business cycle; dynamic factor model;

    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, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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