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Milan’s Cycle as an Accurate Leading Indicator for the Italian Business Cycle

Matteo Pelagatti () and Valeria Negri

No 20080601, Working Papers from Università degli Studi di Milano-Bicocca, Dipartimento di Statistica

Abstract: A coincident business cycle indicator for the Milan area is built on the basis of a monthly industrial survey carried out by Assolombarda, the largest territorial entrepreneurial association in Italy. The indicator is extracted from three time series concerning the production level and the internal and foreign order book as declared by some 250 Assolombarda associates. This indicator is potentially very valuable in itself, being Milan one of the most dynamic economic systems in Italy and Europe, but it becomes much more interesting when compared to the Italian business cycle as extracted form the Italian industrial production index. Indeed, notwithstanding the deep differences in the nature of the data, the indicator for Milan has an extremely high coherence with the Italian cycle and the former leads the latter by approximately 4-5 months. Furthermore there is a direct relation between the amplitude of the cycle and the leading time of the Milan indicator.

Keywords: Leading indicator; unobserved components model; structural time series model; local business survey (search for similar items in EconPapers)
JEL-codes: C22 C32 C53 E32 L60 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-mac
Date: 2008-05
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Published in OECD Journal: Journal of Business Cycle Measurement and Analysis, 2010, vol. 2010, no. 2. artilce 2.

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