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). Available at SSRN: https://ssrn.com/abstract=296860

Filippo Altissimo (Contact Author)

Brevan Howard Asset Management LLP ( email )

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Antonio Bassanetti

Bank of Italy ( email )

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Riccardo Cristadoro

Bank of Italy ( email )

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Mario Forni

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics ( email )

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Centre for Economic Policy Research (CEPR)

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Marc Hallin

ECARES, Universite Libre de Bruxelles ( email )

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Marco Lippi

Dipartimento di Scienze Economiche (DiSSE) ( email )

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

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Lucrezia Reichlin

London Business School ( email )

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

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Centre for Economic Policy Research (CEPR)

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European Central Bank (ECB) ( email )

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Giovanni Furio Veronese

Bank of Italy ( email )

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