Until recently literature on dynamic factor models invariably assumed that the cross sectional error covariance matrix is diagonal. This is due to the many parameters which need to be estimated for large data sets, which is known as the curse of dimensionality. Spencer (2024) introduced a novel...

This paper introduces a novel dynamic factor model designed to capture common locally explosive episodes, also known as common bubbles, within large-dimensional, potentially non-stationary time series. The model leverages a lower-dimensional set of factors exhibiting locally explosive behavior...