The paper examines the processes underlying economic fluctuations by investigating the volatility moderation of U.S. economy in the early 1980's. We decompose the volatility decline using a dynamic factor framework into a common stochastic trend, common transitory component and idiosyncratic...

We analyse co-movements in the fragility of EU banks and verify to which extent such co-movements have increased in time, following, for example, the completion of Monetary Union and the introduction of the euro. To this end, we provide a measure of co-movements in bank risk by means of a...

This paper aims at identifying the main shocks, which cause movements in real GNP. It does so by searching for two shocks in the context of a VAR model, which explain the majority of the k-step ahead prediction error variances in real GNP for horizons between 0 and 5 years. We find that two...

Using a limiting approach to portfolio credit risk, we obtain analytic expressions for the tail behavior of credit losses. To capture the co-movements in defaults over time, we assume that defaults are triggered by a general, possibly non-linear, factor model involving both systematic and...

The linkages between daily Asian and Australian equity market returns over the period 1995–2001 are investigated within the framework of a latent factor model. Transmission mechanisms arising from both market interdependence and contagion are studied. The empirical results reveal that...