Abstract

http://ssrn.com/abstract=1005171
 
 

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New Eurocoin: Tracking Economic Growth in Real Time


Giovanni Veronese


Bank of Italy

Mario Forni


Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics; Centre for Economic Policy Research (CEPR)

Marco Lippi


University of Rome I - Faculty of Statistics - Department of Economic Sciences

Filippo Altissimo


Brevan Howard Asset Management LLP

Riccardo Cristadoro


Bank of Italy

June 2007

Bank of Italy Temi di Discussione (Working Paper) No. 631

Abstract:     
This paper presents ideas and methods underlying the construction of an indicator that tracks the euro area GDP growth, but, unlike GDP growth, (i) is updated monthly and almost in real time; (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 the 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 the GDP growth. As the medium to long-run component of the GDP is observable, although with delay, the performance of New Eurocoin at the end of the sample can be measured.

Number of Pages in PDF File: 44

Keywords: coincident indicator, band-pass filter, large-dataset factor models, generalized principal components

JEL Classification: C51, E32, O30

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Date posted: August 13, 2007  

Suggested Citation

Veronese, Giovanni and Forni, Mario and Lippi, Marco and Altissimo, Filippo and Cristadoro, Riccardo, New Eurocoin: Tracking Economic Growth in Real Time (June 2007). Bank of Italy Temi di Discussione (Working Paper) No. 631. Available at SSRN: http://ssrn.com/abstract=1005171 or http://dx.doi.org/10.2139/ssrn.1005171

Contact Information

Giovanni Furio Veronese (Contact Author)
Bank of Italy ( email )
Via Nazionale 91
Rome, 00184
Italy
+49 621 189 1886 (Phone)
+49 621 189 1884 (Fax)
Mario Forni
Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics ( email )
Viale Berengario 51
41100 Modena, Modena 41100
Italy
+39 059 205 6852 (Phone)
+39 059 205 6947 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Marco Lippi
University of Rome I - Faculty of Statistics - Department of Economic Sciences ( email )
14 Via Cesalpino
Rome, 00161
Italy
+39 06 4428 4202 (Phone)
+39 06 4404 572 (Fax)
Filippo Altissimo
Brevan Howard Asset Management LLP ( email )
2nd Floor Almack House
28 King Street
London, SW1Y 6XA
United Kingdom
Riccardo Cristadoro
Bank of Italy ( email )
Via Nazionale 91
Servizio Studi
00184 Roma
Italy
+39 06 4792 3341 (Phone)
+39 06 4792 3720 (Fax)
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