Eurocoin: A Real Time Coincident Indicator of the Euro Area Business Cycle

49 Pages Posted: 15 Jan 2002

See all articles by Filippo Altissimo

Filippo Altissimo

Brevan Howard Asset Management LLP

Antonio Bassanetti

Bank of Italy

Riccardo Cristadoro

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)

Marc Hallin

ECARES, Universite Libre de Bruxelles

Marco Lippi

Dipartimento di Scienze Economiche (DiSSE); Einaudi Institute for Economics and Finance (EIEF)

Lucrezia Reichlin

London Business School; Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Centre for Economic Policy Research (CEPR); European Central Bank (ECB)

Giovanni Veronese

Bank of Italy

Date Written: December 2001

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 filter 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 by product 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.

Keywords: Business cycle, dynamic factor model

JEL Classification: C51, E32, O30

Suggested Citation

Altissimo, Filippo and Bassanetti, Antonio and Cristadoro, Riccardo and Forni, Mario and Hallin, Marc and Lippi, Marco and Reichlin, Lucrezia and Veronese, Giovanni Furio, Eurocoin: A Real Time Coincident Indicator of the Euro Area Business Cycle (December 2001). CEPR Discussion Paper No. 3108. Available at SSRN: https://ssrn.com/abstract=296860

Filippo Altissimo (Contact Author)

Brevan Howard Asset Management LLP ( email )

2nd Floor Almack House
28 King Street
London, SW1Y 6XA
United Kingdom

Antonio Bassanetti

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Riccardo Cristadoro

Bank of Italy ( email )

Via Nazionale 91
Servizio Studi
00184 Roma
Italy
+39 06 4792 3341 (Phone)
+39 06 4792 3720 (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)

London
United Kingdom

Marc Hallin

ECARES, Universite Libre de Bruxelles ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium
+32 2 650 5886 (Phone)
+32 2 650 5899 (Fax)

Marco Lippi

Dipartimento di Scienze Economiche (DiSSE) ( email )

14 Via Cesalpino
Rome, 00161
Italy
+39 06 4428 4202 (Phone)
+39 06 4404 572 (Fax)

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

Lucrezia Reichlin

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium
+32 2 650 4221 (Phone)
+32 2 650 4475 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Giovanni Furio Veronese

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy
+49 621 189 1886 (Phone)
+49 621 189 1884 (Fax)

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