We study the business cycle in the US over 1959–2011 using a large-dimensional multi-level factor model. We find notable asymmetries over the business cycle, but the bulk of common dynamics is stable over time. The comovement among variables is larger in recessions compared to expansions. The...

In this paper we investigate the consequences of structural breaks in the factor loadings for the specification and estimation of factor models based on principal components and suggest procedures for testing for structural breaks. It is shown that structural breaks severely inflate the number...

Summary The paper assesses the transmission of US supply, demand and monetary policy shocks between 1976 and 2008 based on a factor-augmented vector autoregressive model (FAVAR) which is applied to a newly constructed set of more than 200 German time series. The study not only assesses the...

We analyze the contribution of credit spread, house and stock price shocks to GDP growth in the US based on a Bayesian VAR with time-varying parameters estimated over 1958-2012. Our main findings are: (i) The contribution of financial shocks to GDP growth fluctuates from about 20 percent in...

We study how US credit supply shocks are transmitted to other economies. We use the recently developed GVAR approach to model financial variables jointly with macroeconomic variables in 33 countries for the period 1983–2009. We experiment with inter-country links based on bilateral trade,...

We explore the concept of global liquidity based on a factor model estimated using a large set of financial and macroeconomic variables from 24 advanced and emerging market economies. We measure global liquidity conditions based on the common global factors in the dynamics of liquidity...

We assess the marginal predictive content of a large international dataset for forecasting GDP in New Zealand, an archetypal small open economy. We apply “data-rich” factor and shrinkage methods to efficiently handle hundreds of predictor series from many countries. The methods covered are...

Monetary policy can have an impact on economic and financial stability through the risk taking of banks. Falling interest rates might induce investment into risky activities. This paper provides evidence on the link between monetary policy and bank risk taking. We use a factor-augmented vector...