Dynamic Factor Models and Fractional Integration – With an Application to US Real Economic Activity
Guglielmo Maria Caporale,
Luis Gil-Alana and
Pedro José Piqueras Martínez
No 11486, CESifo Working Paper Series from CESifo
Abstract:
This paper makes a twofold contribution, First, it develops the dynamic factor model of Barigozzi et al. (2016) by allowing for fractional integration instead of imposing the classical dichotomy between I(0) stationary and I(1) non-stationary series. This more general setup provides valuable information on the degree of persistence and mean-reverting properties of the series. Second, the proposed framework is used to analyse five annual US Real Economic Activity series (Employees, Energy, Industrial Production, Manufacturing, Personal Income) over the period from 1967 to 2019 in order to shed light on their degree of persistence and cyclical behaviour. The results indicate that economic activity in the US is highly persistent and is also characterised by cycles with a periodicity of 6 years and 8 months.
Keywords: fractional integration; dynamic factor models; persistence; business cycle; economic activity; Kalman filter; state-space models (search for similar items in EconPapers)
JEL-codes: C22 E32 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp11486.pdf (application/pdf)
Related works:
Journal Article: Dynamic Factor Models and Fractional Integration—With an Application to US Real Economic Activity (2024) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11486
Access Statistics for this paper
More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().