A new macro-financial condition index for the euro area

Claudio Morana

Working Paper series from Rimini Centre for Economic Analysis

Abstract: A new time-domain decomposition for weakly stationary or trend stationary processes is introduced. The method is based on trigonometric polynomial modeling, and it is explicitly devised to disentangle medium to long-term and short-term fluctuations in macroeconomic and financial series. A multivariate extension involving sequential univariate decompositions and Principal Components Analysis is also provided. Based on this multivariate approach, new composite indexes of macro-financial conditions for the euro area are introduced. The indicators suggest that most of the GDP contraction during the current pandemic has been of short-term, cyclical nature. Moreover, the financial cycle might have currently achieved a peak area. Hence, the risk of further, deeper disruptions is high, particularly as a new sovereign/corporate debt crisis were not eventually avoided.

Keywords: trend-cycle decomposition; COVID-19 pandemic; EU Green Deal; subprime financial crisis; sovereign debt crisis; dot-com bubble; macroeconomic and financial conditions index; euro area (search for similar items in EconPapers)
JEL-codes: C22 C38 E32 F44 G01 (search for similar items in EconPapers)
Date: 2021-04, Revised 2021-09
New Economics Papers: this item is included in nep-cdm and nep-pol
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Citations: View citations in EconPapers (7)

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http://rcea.org/RePEc/pdf/wp21-07.pdf

Related works:
Journal Article: A new macro-financial condition index for the euro area (2024)
Working Paper: A new macro-financial condition index for the euro area (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:rim:rimwps:21-07

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