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

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.