DP3285 Factor Models in Large Cross-Sections of Time Series

Author(s): Lucrezia Reichlin
Publication Date: March 2002
Keyword(s): business cycles, factor analysis, panel data
JEL(s): C22, C23, E32, E37
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3285

This Paper reviews recent econometric work on factor models in large cross-sections of time series. In this literature, traditional factor analysis is adapted to develop parsimonious estimation methods for high dimension time series models. The review covers problems of consistency and rates ? as the dimension of the cross-section and the time dimension become large ? identification and forecasting. We also review empirical applications on measuring and interpreting business cycles.