Extracting a Common Cycle from Series with Different Frequency: An Application to the Italian Economy

The extraction of a common signal from a group of time series is generally obtained using variables recorded with the same frequency or transformed to have the same frequency (monthly, quarterly, etc.). The econometric literature has not paid a great deal of attention to this topic. In this paper we extend an approach based on the use of dummy variables to the well known trend plus cycle model, in a multivariate context, using both quarterly and monthly data. This procedure is applied to the Italian economy, using the variables suggested by an Italian Institution (ISAE) to provide a national dating, and compared with the equivalent multivariate and univariate approaches with monthly data. We note that the contemporaneous use of quarterly and monthly data provides results more consistent with the official ones with respect to the other approaches.