Real-Time Signal Extraction with Regularized Multivariate Direct Filter Approach

The paper studies the regularized direct filter approach as a tool for real‐time signal extraction using high‐dimensional datasets. It is shown that the filter is able to process high‐dimensional datasets by controlling for effective degrees of freedom through longitudinal and cross‐sectional regularization. The paper illustrates the merit of the proposed approach by tracking the medium‐ to long‐run component in euro area gross domestic product growth. The created real‐time indicators outperform Eurocoin with respect to timeliness.