hero working papers

Monitoring the Economy of the Euro Area: A Comparison of Composite Coincident

Number: 319
Year: 2007
Author(s): Andrea Carriero and Massimiliano Marcellino
Monitoring the current status of the economy is quite relevant for policy making
but also for the decisions of private agents, consumers and firms. Since it is difficult
to identify a single variable that provides a good measure of current economic
conditions, it can be preferable to consider a combination of several coincident indicators,
i.e., a composite coincident index (CCI). In this paper, we review the main
statistical techniques for the construction of CCIs, propose a new pooling-based
method, and apply the alternative techniques for constructing CCIs for the largest
European countries in the euro area and for the euro area as a whole. We find that
different statistical techniques yield comparable CCIs, so that it is possible to reach
a consensus on the status of the economy.

Keywords: Business Cycles, Leading Indicators, Coincident Indicators, TurningPoints, Forecasting