Monitoring the Economy of the Euro Area: A Comparison of Composite Coincident Indexes

Andrea Carriero and Massimiliano Marcellino

No 319, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

Abstract: Monitoring the current status of the economy is quite relevant for policy making but also for the decisions of private agents, consumers and firms. Since it is difficult to identify a single variable that provides a good measure of current economic conditions, it can be preferable to consider a combination of several coincident indicators, i.e., a composite coincident index (CCI). In this paper, we review the main statistical techniques for the construction of CCIs, propose a new pooling-based method, and apply the alternative techniques for constructing CCIs for the largest European countries in the euro area and for the euro area as a whole. We find that different statistical techniques yield comparable CCIs, so that it is possible to reach a consensus on the status of the economy.

Date: 2007
New Economics Papers: this item is included in nep-cba and nep-eec
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