A disadvantage of EMU is the lack of national monetary policy to absorb country-specific shocks. The seriousness of this depends on the availability of alternative adjustment mechanisms, as well as on the asymmetry of the demand and supply shocks within EMU. Previous empirical research on the...

Many empirical studies show that factor models have a relatively high forecast compared to alternative short-term forecasting models. These empirical findings have been established for different data sets and for different forecast horizons. However, choosing the appropriate factor model...