Knowledge that Transforms

This paper proposes a factor model with infinite dynamics and nonorthogonal idiosyncratic components. The model, which we call the generalized dynamic-factor model, is novel to the literature and generalizes the static approximate factor model of Chamberlain and Rothschild (1983), as well as the exact factor model à la Sargent and Sims (1977). We provide identification conditions, propose an estimator of the common components, prove convergence as both time and cross-sectional size go to infinity at appropriate rates, and present simulation results. We use our model to construct a coincident index for the European Union. Such index is defined as the common component of real GDP within a model including several macroeconomic variables for each European country.

Journal Article Review of Economic Studies European Meetings Get access The Review of Economic Studies, Volume 67, Issue 4, October 2000, Page 811, https://doi.org/10.1111/1467-937X.00155 Published: 01 October 2000

The front matter of the March 2000 issue contains the Table of Contents.

The proposed budget for 2000 in Table 1 projects an operating loss of $736 thousand, investment income of $598 thousand, and an overall deficit for the year of $138 thousand.Net