Common Factors in Conditional Distributions

Clive W. J. Granger, Timo Teräsvirta and Andrew Patton ()
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Timo Teräsvirta: CREATES, School of Economics and Management, University of Aarhus and Stockholm School of Economics
Authors registered in the RePEc Author Service: Timo Teräsvirta ()

No 2002-19, University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego

Abstract: Dominant properties of various kinds can be defined for distributions including trends, strong seasonality, business cycles, and a persistent component. We say that in the joint distribution of X and Y, conditional on W has a common factor if W is a dominant component, but it does not appear in the copula, only in the conditional marginal distributions for X and Y. An application is discussed involving national income and consumption and a business cycle indicator. The results suggest that the marginals vary with the business cycle but not the copula.

Keywords: common factors; seasonality; business cycles (search for similar items in EconPapers)
Date: 2002-11-01
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Working Paper: Common factors in conditional distributions (2002)
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