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New Eurocoin: Tracking Economic Growth in Real Time

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Author Info
Filippo Altissimo () (Brevan Howard Asset Management)
Riccardo Cristadoro () (Banca d'Italia)
Mario Forni () (Università di Modena)
Marco Lippi () (Università La Sapienza di Roma)
Giovanni Veronese () (Banca d'Italia)

Additional information is available for the following registered author(s):

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.

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Paper provided by Bank of Italy, Economic Research Department in its series Temi di discussione (Economic working papers) with number 631.

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Date of creation: Jun 2007
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Handle: RePEc:bdi:wptemi:td_631_07

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Related research
Keywords: coincident indicator; band-pass filter; large-dataset factor models; generalized principal components;

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Find related papers by JEL classification:
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General

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References listed on IDEAS
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Massimiliano Marcellino & Christian Schumacher, 2008. "Factor-MIDAS for Now- and Forecasting with Ragged-Edge Data: A Model Comparison for German GDP1," Working Papers 333, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
    Other versions:
  2. Proietti, Tommaso, 2008. "Estimation of Common Factors under Cross-Sectional and Temporal Aggregation Constraints: Nowcasting Monthly GDP and its Main Components," MPRA Paper 6860, University Library of Munich, Germany. [Downloadable!]
  3. Andrea Carriero & Massimiliano Marcellino, 2007. "Monitoring the Economy of the Euro Area: A Comparison of Composite Coincident Indexes," Working Papers 319, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
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  6. Riccardo Cristadoro & Fabrizio Venditti & Giuseppe Saporito, 2008. "Forecasting inflation and tracking monetary policy in the euro area - does national information help?," Working Paper Series 900, European Central Bank. [Downloadable!]
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  7. Maximo Camacho & Gabriel Perez-Quiros, 2008. "Introducing the EURO-STING: Short Term INdicator of Euro Area Growth," Banco de España Working Papers 0807, Banco de España. [Downloadable!]
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  8. Ard den Reijer, 2007. "Identifying Regional and Sectoral Dynamics of the Dutch Staffing Labour Cycle," DNB Working Papers 153, Netherlands Central Bank, Research Department. [Downloadable!]
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    Other versions:
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