Financial conditions indexes are developed for the United States and euro area using a wide range of financial indicators and a dynamic factor model. The financial conditions indexes are shown to be useful for forecasting economic activity and have good revision properties

In this paper, we introduce a new time-domain decomposition for weakly stationary or trend stationary processes, based on trigonometric polynomial modeling of the underlying component of an economic time series. The method is explicitly devised to disentangle medium to long-term and short-term...

This paper assesses the performance of monetary indicators as well as of a large range of economic and financial indicators in predicting euro area HICP inflation out-of-sample over the period first quarter 1999 till third quarter 2006 considering standard bivariate forecasting models, factor...

This paper reviews the usefulness of monetary conditions in the euro area as leading indicators for aggregate demand conditions. Monetary conditions are measured with the MCI concept proposed by the Bank of Canada, and with the yield spread. A central result is that causality runs in both ways...

A Monetary Conditions Index (MCI), a weighted average of the short-term real interest rate and the real exchange rate, is a commonly used indicator of aggregate demand conditions. In-sample evidence for the US, the euro area, Japan and the UK suggests that a Financial Conditions Index (FCI),...