Is Industrial Production Still the Dominant Factor for the US Economy?

Elena Andreou, Patrick Gagliardini (), Eric Ghysels and Mirco Rubin
Additional contact information
Elena Andreou: University of Cyprus - Department of Economics
Eric Ghysels: University of North Carolina Kenan-Flagler Business School; University of North Carolina (UNC) at Chapel Hill - Department of Economics
Mirco Rubin: Università della Svizzera Italiana and Swiss Finance Institute

No 16-11, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We propose a new class of approximate factor models which enable us to study the full spectrum of quarterly IP sector data combined with annual non-IP sectors of the economy. We derive the large sample properties of the estimators for the new class of factor models involving mixed frequency data. Despite the growth of service sectors, we find that a single common factor explaining 90% of the variability in IP output growth index also explains 60% of total GDP output growth fluctuations. A single low frequency factor unrelated to manufacturing explains 14% of GDP growth. The picture with a structural factor model featuring technological innovations is quite different. IP sectors technology shocks do not play a dominant role.

Pages: 79 pages
Date: 2016-02
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Is Industrial Production Still the Dominant Factor for the US Economy? (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1611

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