A Monthly Indicator of the Euro Area GDP

41 Pages Posted: 18 Dec 2008

See all articles by Cecilia Frale

Cecilia Frale

Government of the Italian Republic (Italy) - Department of the Treasury

Massimiliano Giuseppe Marcellino

European University Institute; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); Bocconi University - Department of Economics; Centre for Economic Policy Research (CEPR)

Gian Luigi Mazzi

Eurostat

Tommaso Proietti

University of Rome II - Department of Economics and Finance

Date Written: October 2008

Abstract

A continuous monitoring of the evolution of the economy is fundamental for the decisions of public and private decision makers. This paper proposes a new monthly indicator of the euro area real Gross Domestic Product (GDP), with several original features. First, it considers both the output side (six branches of the NACE classification) and the expenditure side (the main GDP components) and combines the two estimates with optimal weights reflecting their relative precision. Second, the indicator is based on information at both the monthly and quarterly level, modelled with a dynamic factor specification cast in state-space form. Third, since estimation of the multivariate dynamic factor model can be numerically complex, computational efficiency is achieved by implementing univariate filtering and smoothing procedures. Finally, special attention is paid to chain-linking and its implications, via a multistep procedure that exploits the additivity of the volume measures expressed at the prices of the previous year.

Keywords: Chain-linking, Dynamic factor Models, euro area GDP, Kalman filter and smoother, Multivariate State Space Models, Temporal Disaggregation

JEL Classification: C53, E32, E37

Suggested Citation

Frale, Cecilia and Marcellino, Massimiliano and Mazzi, Gian Luigi and Proietti, Tommaso, A Monthly Indicator of the Euro Area GDP (October 2008). CEPR Discussion Paper No. DP7007. Available at SSRN: https://ssrn.com/abstract=1311131

Cecilia Frale

Government of the Italian Republic (Italy) - Department of the Treasury ( email )

Via XX Settembre, 87
Rome, 00197
Italy

Massimiliano Marcellino (Contact Author)

European University Institute ( email )

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), Tuscany 50014
Italy

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Gian Luigi Mazzi

Eurostat ( email )

JMO Building Bech A2/44
Luxembourg, L-2920
Luxembourg

Tommaso Proietti

University of Rome II - Department of Economics and Finance ( email )

Via Columbia, 2
Rome, 00133
Italy

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