We test the importance of multivariate information for modelling and forecasting in- flation's conditional mean and variance. In the literature, the existence of inflation's conditional heteroskedasticity has been debated for years, as it seemed to appear only in some datasets and for some lag...

Economic theory typically assumes the existence of few unobserved unpredictable stochastic disturbances, called structural shocks, driving the whole economy. Would the economy be representable as a very high dimensional stochastic vector process, those shocks would be the reduced rank innovation...

We propose a new method for multivariate forecasting which combines Dynamic Factor and multivariate GARCH models. The information contained in large datasets is captured by few dynamic common factors, which we assume being conditionally heteroskedastic. After presenting the model, we propose a...

This paper discusses some problems possibly arising when approximating via Monte-Carlo simulations the distributions of goodness-of-fit test statistics based on the empirical distribution function. We argue that failing to re-estimate unknown parameters on each simulated Monte-Carlo sample —...

We use a factor model to detect the presence of economy-wide underlying forces leading firm growth. By using quarterly firm level data on 660 US firms for 20 years, we find evidence of a unique common factor explaining approximately one fifth of the variance of firm growth rates. We investigate...

This paper explores the statistical properties of household consumption-expenditure budget share distributions – defined as the share of household total expenditure spent for purchasing a specific category of commodities – for a large sample of Italian households in the period 1989–2004....

This paper explores the statistical properties of household consumption-expenditure budget shares distributions (HBSDs) – defined as the share of household total expenditure spent for purchasing a specific category of commodities – for a large sample of Italian households in the...

We propose a new method for multivariate forecasting which combines Dynamic Factor and multivariate GARCH models. We call the model Dynamic Factor GARCH, as the information contained in large macroeconomic or financial datasets is captured by a few dynamic common factors, which we assume being...

We modify the criterion by Bai and Ng (2002) for determining the number of factors in approximate factor models. As in the original criterion, for any given number of factors we estimate the common and idiosyncratic components of the model by applying principal component analysis. We select the...