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Discussion Paper Details

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

Author(s): Filippo Altissimo, Antonio Bassanetti, Riccardo Cristadoro, Mario Forni, Marc Hallin, Marco Lippi, Lucrezia Reichlin and Giovanni Veronese

Publication Date: December 2001

Keyword(s): business cycle and dynamic factor model

Programme Area(s): International Macroeconomics

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.

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Bibliographic Reference

Altissimo, F, Bassanetti, A, Cristadoro, R, Forni, M, Hallin, M, Lippi, M, Reichlin, L and Veronese, G. 2001. 'EuroCOIN: A Real Time Coincident Indicator of the Euro Area Business Cycle'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3108