This paper re-assesses the panel (unit root test) evidence for PPP on four monthly data sets. We discuss and illustrate that commonly-used first generation panel unit root tests are inappropriate for PPP analysis since they are constructed for cross-sectionally uncorrelated panels. Given that...

The issue of measurement invariance commonly arises in factor-analytic contexts, with methods for assessment including likelihood ratio tests, Lagrange multiplier tests, and Wald tests. These tests all require advance definition of the number of groups, group membership, and offending model...

OECD unemployment rates show long swings which dominate shorter business cycle components and these long swings show a range of common patterns. Using a panel of 21 OECD countries 1960-2002, we estimate the common factor that drives unemployment by the first principal component. This factor has...

This paper discusses a large-scale factor model for the German economy. Following the recent literature, a data set of 121 time series is used via principal component analysis to determine the factors, which enter a dynamic model for German GDP. The model is compared with alternative univariate...

In this paper we rely on techniques recently developed by Bai and Ng (2004a) to estimate common euro-area stationary and non-stationary factors using a large-scale dynamic factor model. We find that euro-area economies share four non-stationary factors or trends and one stationary factor. By...

This paper discusses the forecasting performance of alternative factor models based on a large panel of quarterly time series for the german economy. One model extracts factors by static principals components analysis, the other is based on dynamic principal components obtained using frequency...

Factor models can cope with many variables without running into scarce degrees of freedom problems often faced in a regression-based analysis. In this article we review recent work on dynamic factor models that have become popular in macroeconomic policy analysis and forecasting. By means of an...

This paper seeks to assess comovements and heterogeneity in the euro area by fitting a nonstationary dynamic factor model (Bai and Ng, 2004), augmented with a structural factor setup (Forni and Reichlin, 1998), to a large set of euro-area macroeconomic variables observed between 1982 and 2003....

This paper discusses a factor model for estimating monthly GDP using a large number of monthly and quarterly time series in real-time. To take into account the different periodicities of the data and missing observations at the end of the sample, the factors are estimated by applying an EM...

This paper surveys existing factor forecast applications for real economic activity and inflation by means of a meta-analysis and contributes to the current debate on the determinants of the forecast performance of large-scale dynamic factor models relative to other models. We find that, on...