The construction of coincident and leading indicators for the euro area business cycler of the euro area business cycle
Filippo Altissimo (),
Antonio Bassanetti (),
Riccardo Cristadoro (),
Lucrezia Reichlin () and
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Filippo Altissimo: Bank of Italy, Economic Research Department and CEPR
Antonio Bassanetti: Bank of Italy, Economic Research Department
No 434, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area
This paper investigates the business cycle properties of the euro area and computes a coincident and a leading indicator of economic activity. We accomplish this by applying the newly introduced generalized factor model to a properly constructed and harmonized data set of short term statistics of the euro area (794 monthly series). Unlike other methods used in the literature, the procedure takes into consideration the cross-country as well as the withincountry correlation structure and exploits all information on dynamic cross-correlations. As a byproduct 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 (search for similar items in EconPapers)
JEL-codes: C51 E32 O30 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_434_01
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