Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/59463 
Year of Publication: 
2011
Series/Report no.: 
Working Paper No. 2011-14
Publisher: 
Rutgers University, Department of Economics, New Brunswick, NJ
Abstract: 
Diffusion index models have received considerable attention from both theoreticians and empirical econometricians in recent years. One reason for this is that datasets with many variables are increasingly becoming available and being utilized for economic modelling, and another is that common factors are often assumed to underlie the co-movements of a set of macroeconomic variables. In this paper we review some recent results in the study of diffusion index models, focusing primarily on advances due to [4, 5] and [1]. We discuss, for example, the construction of factors used in prediction models implemented using diffusion index methodology and approaches that are useful for assessing whether there are observable variables that adequately proxy for estimated factors.
Subjects: 
diffusion index
factor
forecast
macroeconometrics
parameter estimation error
proxy
Document Type: 
Working Paper

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