This paper extends the analysis of infinite dimensional vector autoregressive models (IVAR) proposed in Chudik and Pesaran (2010) to the case where one of the variables or the cross section units in the IVAR model is dominant or pervasive. This extension is not straightforward and involves...

This paper introduces the concepts of time-specific weak and strong cross section dependence. A double-indexed process is said to be cross sectionally weakly dependent at a given point in time, t, if its weighted average along the cross section dimension (N) converges to its expectation in...

I show that the detrending of financial variables with the Hodrick and Prescott (1981, 1997) (HP) and band-pass filters leads to spurious cycles. I find that distortions become especially severe when considering medium-term cycles, i.e., cycles that exceed the duration of regular business...

This paper introduces a novel approach for dealing with the "curse of dimensionality" in the case of large linear dynamic systems. Restrictions on the coefficients of an unrestricted VAR are proposed that are binding only in a limit as the number of endogenous variables tends to infinity. It is...

Factor based forecasting has been at the forefront of developments in the macroeconometric forecasting literature in the recent past. Despite the flurry of activity in the area, a number of specification issues such as the choice of the number of factors in the forecasting regression, the...

This paper introduces the concepts of time-specific weak and strong cross section dependence. A double-indexed process is said to be cross sectionally weakly dependent at a given point in time, t, if its weighted average along the cross section dimension (N) converges to its expectation in...

We study differences in the adjustment of aggregate real wages in the manufacturing sector over the business cycle across OECD countries, combining results from different data and dynamic methods. Summary measures of cyclicality show genuine cross-country heterogeneity even after controlling for...

We construct a growth model with an explicit government role, where more government resources reduce the optimal level of private consumption and of output per worker. In the empirical analysis, for a panel of 108 countries from 1970-2008, we use different proxies for government size and...

This paper extends the analysis of infinite dimensional vector autoregressive models (IVAR) proposed in Chudik and Pesaran (2010) to the case where one of the variables or the cross section units in the IVAR model is dominant or pervasive. This extension is not straightforward and involves...

What are the drivers of business cycle fluctuations? And how many are there? By documenting strong and predictable co-movement of real variables during the business cycle in a sample of advanced economies, we argue that most business cycle fluctuations a re d riven b y o ne major factor. The...