Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2023-04-23
Number: 23-021/III
Author-Name: Mariia Artemova
Author-Workplace-Name: Vrije Universiteit Amsterdam
Author-Name: Francisco Blasques
Author-Workplace-Name: Vrije Universiteit Amsterdam
Author-Name: Siem Jan Koopman
Author-Workplace-Name: Vrije Universiteit Amsterdam
Title: A Multilevel Factor Model for Economic Activity with Observation Driven Dynamic Factors
Abstract: We analyze the role of industrial and non-industrial production sectors in the
US economy by adopting a novel multilevel factor model. The proposed model
is suitable for high-dimensional panels of economic time series and allows for
interdependence structures across multiple sectors. The estimation procedure
is based on a multistep least squares method which is simple and fast in its
implementation. By analyzing the shock propagation process throughout the
network of interconnections, we corroborate some of the key findings about the
role of industrial production in the US economy, quantify the importance of
propagation effects and shed new light on dynamic sectoral linkages.
Classification-JEL: C22, C32, C38, C51
Keywords: Dynamic factor model, Interconnectedness, Output growth.
File-URL: https://papers.tinbergen.nl/23021.pdf
File-Format: application/pdf
File-Size: 1.376.037 bytes
Handle: RePEc:tin:wpaper:20230021