Abstract
This paper develops a method to analyze large cross-sections with non-trivial time dimension. 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 fundamentalness of the common shocks; (iv) quantifies positive and negative comovements at each frequency. We illustrate how the proposed techniques can be used for analyzing features of the business cycle and economic growth.
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© 1996 Physica-Verlag Heidelberg
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Forni, M., Reichlin, L. (1996). Dynamic Common Factors in Large Cross-Sections. In: Durlauf, S., Helliwell, J.F., Raj, B. (eds) Long-Run Economic Growth. Studies in Empirical Economics. Physica-Verlag HD. https://doi.org/10.1007/978-3-642-61211-4_3
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DOI: https://doi.org/10.1007/978-3-642-61211-4_3
Publisher Name: Physica-Verlag HD
Print ISBN: 978-3-642-64747-5
Online ISBN: 978-3-642-61211-4
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