New Eurocoin: Tracking Economic Growth in Real Time

Filippo Altissimo, Riccardo Cristadoro, Mario Forni, Marco Lippi and Giovanni Veronese

No 631, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper presents ideas and methods underlying the construction of an indicator that tracks the euro area GDP growth, but, unlike GDP growth, (i) is updated monthly and almost in real time; (ii) is free from hort-run dynamics. Removal of short-run dynamics from a time series, to isolate the mediumlong-run component, can be obtained by a band-pass filter. However, it is well known that band-pass filters, being two-sided, perform very poorly at the end of the sample. New Eurocoin is an estimator of the medium- long-run component of the GDP that only uses contemporaneous values of a large panel of macroeconomic time series, so that no end-of-sample deterioration occurs. Moreover, as our dataset is monthly, New Eurocoin can be updated each month and with a very short delay. Our method is based on generalized principal components that are designed to use leading variables in the dataset as proxies for future values of the GDP growth. As the medium- long-run component of the GDP is observable, although with delay, the performance of New Eurocoin at the end of the sample can be measured.

Keywords: coincident indicator; band-pass filter; large-dataset factor models; generalized principal components (search for similar items in EconPapers)
JEL-codes: C51 E32 O30 (search for similar items in EconPapers)
Date: 2007-06
New Economics Papers: this item is included in nep-ecm, nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (45)

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Related works:
Journal Article: New Eurocoin: Tracking Economic Growth in Real Time (2010)
Working Paper: New Eurocoin: Tracking Economic Growth in Real Time (2008)
Working Paper: New EuroCOIN: Tracking Economic Growth in Real Time (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_631_07

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