Dynamic Common Factors in Large Cross-Sections

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Published in RePEc

Abstract

This paper develops a method to analyse large cross-sections with non-trivial time dimensions. The method: (i) identifies the number of common shocks in a factor analytic model; (ii) estimates the unobserved common dynamic component; (iii) shows how to test for fundamentality of the common shocks; and (iv) quantifies positive and negative comovements at each frequency. We illustrate how the proposed techniques can be used for analysing features of the business cycle and economic growth.

Keywords

LARGE CROSS SECTIONS
ECONOMIC GROWTH
DYNAMIC COMMON
ANALYTIC MODEL
COMMON FACTORS
ANALYSE LARGE
COMMON SHOCKS
SHOCKS

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