The Italian Business Cycle; Coincident and Leading Indicators and Some Stylized Facts

This paper analyses the business cycle properties of 183 time series relevant to the Italian economy, including real, monetary and international variables. We propose new monthly coincident and leading composite indicators for the Italian business cycle; the leading indicator anticipates the turning points of the coincident indicator on average by six months. On the methodological side, the study provides a scheme for constructing cyclical indicators on a sound statistical basis through iterative steps, combining the use of traditional NBER methods with that of more recent techniques of cyclical analysis. A number of stylized facts of the Italian business cycle emerge. Among them, money and financial variables are found to lead the cycle, chronologically, by an average of between one year and sixteen months. There is also strong evidence of synchronization of international cycles, with the US and UK cycles leading the Italian cycle by two to three quarters. The main linking channel seems to be trade, with Italian exports to EU countries leading the cycle by six months on average.