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Turning-point indicators from business surveys: real-time detection for the euro area and its major member countries

Author

Listed:
  • Alberto Baffigi

    (Banca d'Italia)

  • Antonio Bassanetti

    (Banca d'Italia)

Abstract

We present tools for real-time detection of turning points in the industrial production growth-cycle of the euro area and its four largest economies. In particular, we apply a multivariate hidden Markov model to national survey results � i.e. to the earliest information about current economic developments - in order to estimate the probability of expansionary and recessionary phases. The balances of opinions used as inputs of the model are selected by ranking them according to their degree of commonality with respect to the cyclical fluctuations of the industrial sector, as estimated with the Generalized Dynamic Factor Model. The indicators appear reliable and stable.

Suggested Citation

  • Alberto Baffigi & Antonio Bassanetti, 2004. "Turning-point indicators from business surveys: real-time detection for the euro area and its major member countries," Temi di discussione (Economic working papers) 500, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_500_04
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    References listed on IDEAS

    as
    1. Paolo Finaldi Russo & Luigi Leva, 2004. "Il debito commerciale in Italia: quanto contano le motivazioni finanziarie?," Temi di discussione (Economic working papers) 496, Bank of Italy, Economic Research and International Relations Area.
    2. Emilio Barucci & Claudio Impenna & Roberto Reno, 2003. "The Italian overnight market: microstructure effects, the martingale hypothesis and the payment system," Temi di discussione (Economic working papers) 475, Bank of Italy, Economic Research and International Relations Area.
    3. 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.
    4. Roberta Zizza, 2002. "Forecasting the industrial production index for the euro area through forecasts for the main countries," Temi di discussione (Economic working papers) 441, Bank of Italy, Economic Research and International Relations Area.
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    Cited by:

    1. Raffaello Bronzini, 2004. "Foreign direct investment and agglomeration: evidence from Italy," Temi di discussione (Economic working papers) 526, Bank of Italy, Economic Research and International Relations Area.
    2. Sangalli, Ilaria, 2013. "Inventory investment and financial constraints in the Italian manufacturing industry: A panel data GMM approach," Research in Economics, Elsevier, vol. 67(2), pages 157-178.

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    More about this item

    Keywords

    business cycle; hidden Markov model; business surveys;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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