This paper considers quasi-maximum likelihood estimations of a dynamic approximate factor model when the panel of time series is large. Maximum likelihood is analyzed under different sources of misspecification: omitted serial correlation of the observations and cross-sectional correlation of...

This paper shows that general equilibrium effects can partly rationalize the high correlation between saving and investment rates observed in OECD countries. We find that once controlling for general equilibrium effects the saving-retention coefficient remains high in the 70’s but decreases...

This paper describes how we constructed a real-time database for the euro area covering more than 200 series regularly published in the European Central Bank Monthly Bulletin, as made available ahead of publication to the Governing Council members before their first meeting of the month. We...

The aim of this paper is to assess whether explicitly modeling structural change increases the accuracy of macroeconomic forecasts. We produce real time out-of-sample forecasts for inflation, the unemployment rate and the interest rate using a Time-Varying Coefficients VAR with Stochastic...

This paper shows that the EMU has not affected historical characteristics of member countries’ business cycles and their cross-correlations. Member countries which had similar levels of GDP per-capita in the seventies have also experienced similar business cycles since then and no significant...

We consider the problem of portfolio selection within the classical Markowitz meanvariance optimizing framework, which has served as the basis for modern portfolio theory for more than 50 years. Efforts to translate this theoretical foundation into a viable portfolio construction algorithm have...

Not so much and we should not, at least not yet. JEL Classification: E32, C33, C53, F2, F43

This paper shows how large-dimensional dynamic factor models are suitable for structural analysis. We establish sufficient conditions for identification of the structural shocks and the associated impulse response functions. In particular, we argue that, if the data follow an approximate factor...

This paper shows that Vector Autoregression with Bayesian shrinkage is an appropriate tool for large dynamic models. We build on the results by De Mol, Giannone, and Reichlin (2008) and show that, when the degree of shrinkage is set in relation to the cross-sectional dimension, the forecasting...

Global financial integration unlocks a huge potential for international risk sharing. We examine the degree to which international equity holdings act as a risk sharing device in industrial and emerging economies. We split equity returns into investment income (dividend distribution) and capital...