Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/283526 
Year of Publication: 
2024
Series/Report no.: 
Working Paper No. 24.02
Publisher: 
Swiss National Bank, Study Center Gerzensee, Gerzensee
Abstract: 
It is common to transform data to stationarity, such as by differencing and demeaning, before estimating factor models in macroeconomics. Imposing these transformations, however, limit opportunities to learn about trending behaviour. Trends and deterministic processes can play a central role in the behaviour of macroeconomic processes and so it is important to be able to characterise these features of the data. In this paper, we develop a model of common and idiosyncratic deterministic and stochastic processes in a factor model. We work with the unidentified model. A judicious choice of parameter expansion and post-processing ensures the model avoids a non-invariant specification such that the inference is data driven and the computation is efficient.
Document Type: 
Working Paper

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