New Eurocoin: Tracking Economic Growth in Real Time
44 Pages Posted: 13 Aug 2007
There are 2 versions of this paper
New Eurocoin: Tracking Economic Growth in Real Time
New Eurocoin: Tracking Economic Growth in Real Time
Date Written: June 2007
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.
Keywords: coincident indicator, band-pass filter, large-dataset factor models, generalized principal components
JEL Classification: C51, E32, O30
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Generalized Dynamic Factor Model: One-Sided Estimation and Forecasting
By Mario Forni, Marc Hallin, ...
-
Arbitrage, Factor Structure, and Mean-Variance Analysis on Large Asset Markets
-
By James H. Stock and Mark W. Watson
-
Monetary Policy in a Data-Rich Environment
By Ben S. Bernanke and Jean Boivin
-
Eurocoin: A Real Time Coincident Indicator of the Euro Area Business Cycle
By Filippo Altissimo, Antonio Bassanetti, ...
-
Are More Data Always Better for Factor Analysis?
By Jean Boivin and Serena Ng
-
Implications of Dynamic Factor Models for VAR Analysis
By James H. Stock and Mark W. Watson
-
By Domenico Giannone, Lucrezia Reichlin, ...
-
By Domenico Giannone, Lucrezia Reichlin, ...