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structural breaks in the factor loadings for the specification and estimation of factor models based on principal components and … correlated. We also apply the suggested test procedure to a US dataset used in Stock and Watson (2005) and a euro-area dataset …
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We assess the effects of financial shocks on inflation, and to what extent financial shocks can account for the "missing disinflation" during the Great Recession. We apply a vector autoregressive model to US data and identify financial shocks through sign restrictions. Our main finding is that...
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