A new macro-financial condition index for the euro area

No 467, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: A new time-domain decomposition for weakly stationary or trend stationary processes is introduced. The method is based on trigonometric polynomial modeling, and it is explicitly devised to disentangle medium to long-term and short-term fluctuations in macroeconomic and financial series. A multivariate extension involving sequential univariate decompositions and Principal Components Analysis is also provided. Based on this multivariate approach, new composite indexes of macro-financial conditions for the euro area are introduced. The indicators suggest that most of the GDP contraction during the current pandemic has been of short-term, cyclical nature. Moreover, the financial cycle might have currently achieved a peak area. Hence, the risk of further, deeper disruptions is high, particularly as a new sovereign/corporate debt crisis were not eventually avoided.

Keywords: trend-cycle decomposition; COVID-19 pandemic; EU Green Deal; subprime financial crisis; sovereign debt crisis; dot-com bubble; macroeconomic and financial conditions index; euro area (search for similar items in EconPapers)
JEL-codes: C22 C38 E32 F44 G01 (search for similar items in EconPapers)
Pages: 64
Date: 2021-04, Revised 2021-09
New Economics Papers: this item is included in nep-eec, nep-ets and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: A new macro-financial condition index for the euro area (2024)
Working Paper: A new macro-financial condition index for the euro area (2021)
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