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Dynamic Common Factors in Large Cross-Sections

Mario Forni () and Lucrezia Reichlin ()

No 1285, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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: Business Cycle; Factor Analysis; Principal Components; Sectoral Comovements (search for similar items in EconPapers)
JEL-codes: C51 E32 O30 (search for similar items in EconPapers)
Date: 1995-12
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Related works:
Journal Article: Dynamic Common Factors in Large Cross-Sections (1996)
Working Paper: Dynamic common factors in large cross-sections (1996)
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