International Centre for Economic Research Working Paper Series
نویسنده
چکیده
In the paper a new approach to the modelling of common components in long memory processes is introduced. The approach is based on a two-step procedure relying on Fourier transform methods ( rst step) and principal components analysis (second step), which, di¤erently from previous contributions to the literature, allows the modelling of large data sets, both in terms of temporal and cross-sectional dimensions. Monte Carlo evidence, supporting the two-step estimation procedure, is also provided, as well as an empirical application to real data. Keywords: long memory; common long memory factor model; permanent-persistent-non persistent decomposition; permanent-transitory decomposition. JEL classi cation: C32. Address for correspondence: Claudio Morana, University of Piemonte Orientale, Faculty of Economics and Quantitative Methods, Via Perrone 18, 28100, Novara, Italy; [email protected]. The author is grateful to two anonymous referees for constructive comments.
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This paper is one of a series of reports supported by the UK " s Department for International Development (DFID) and the International Development Research Centre (IDRC). However, the views expressed in this paper are those of the author and do not necessarily represent those of IDRC, its Board of Governors, or DFID.
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