This paper shows consistency of a two step estimation of the factors in a dynamic approximate factor model when the panel of time series is large ( large). In the first step, the parameters of the model are estimated from an OLS on principal components. In the second step, the factors are...

In this paper, an interior-point based global filtering algorithm is proposed to solve linear programming problems with the right-hand-side and cost vectors being stochastic. Previous results on the limiting properties of the Kalman filtering process have been extended to handle some...

The paper investigates the impact of oil price volatility on the dynamics of systematic risk in eight equity sectors for Kuwait. To achieve this goal, it uses the Kalman filter approach to estimate the time-variant systematic risk in those sectors. This approach enables us to study the...

The natural real interest rate (NRI) is one of the components of the interest rate rule presented by J.B. Taylor (Taylor rule). Original proposal of this rule is to provide recommendations for the monetary authorities for achieving good economic performance. Essential task of the central bank...

In this paper, we seek to determine whether the recent increase in commodity prices, and especially in prices of food products, reflects a regime switch towards higher price levels. Accordingly, we use a Kalman filter and a Markov-switching model in order to analyze the evolution of...

The paper revisits dynamic term structure models (DTSMs) and proposes a new way in dealing with the limitation of the classical affine models. In particular, this paper expands the flexibility of the DTSMs by applying a fractional Brownian motion as the governing force of the state variable...

In this paper, we focus on thorough yield curve modelling. We build on extended classical Nelson-Siegel model, which we further develop to accommodate unobserved regional common factors. We centre our discussion on Central European currencies’ yield curves: CZK, HUF, PLN and SKK. We propose a...

The paper estimates currency risk premia for the Czech Republic, Hungary, Poland and Slovakia. Three different approaches are applied: a constant premium approach based on rational expectations, while time-varying premia are estimated with a method using financial market analysts’ surveys and...

If some consumers are liquidity-constrained, aggregate consumption should be ‘excessively sensitive’ to credit conditions as well as to income. Moreover, the ‘excess sensitivity’ may vary over time. Using data for Canada, France, Japan, the United Kingdom and the United States, we find a...

Our data on investment in Central and Eastern European economies reveal that, though investment rates were typically high in the 1970s, the marginal efficiency of investment was low. Investment shares begun to decline in the 1980s, before the collapse of the communist system, but there was some...