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Markov-Switching Common Dynamic Factor Model with Mixed-Frequency Data

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  • Konstantin A. KHOLODILIN

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

In this paper, we consider a coincident economic indicator model with regime-switching dynamics and with the time series observed at different frequencies, for instance, at monthly and quarterly frequencies. Until now the only solution was to drop the lower frequency series and to estimate the model based only on the higher frequency series. This approach leads to the significant information losses. We propose an approach allowing to overcome this problem and to estimate a nonlinear dynamic common factor with the missing observations taking advantage of all the information available.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2001020.

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Length: 13
Date of creation: 01 Sep 2001
Date of revision:
Handle: RePEc:ctl:louvir:2001020

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Related research

Keywords: Common dynamic factor; Markov switching; Mixed frequency data; Kalman filter; Composite economic indicator;

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References

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  1. Kim, C-J., 1991. "Dynamic Linear Models with Markov-Switching," Papers 91-8, York (Canada) - Department of Economics.
  2. James H. Stock & Mark W. Watson, 1988. "A Probability Model of The Coincident Economic Indicators," NBER Working Papers 2772, National Bureau of Economic Research, Inc.
  3. Francis X. Diebold & Glenn D. Rudebusch, 1994. "Measuring Business Cycles: A Modern Perspective," NBER Working Papers 4643, National Bureau of Economic Research, Inc.
  4. Roberto S. Mariano & Yasutomo Murasawa, 2003. "A new coincident index of business cycles based on monthly and quarterly series," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(4), pages 427-443.
  5. Chauvet, Marcelle, 1998. "An Econometric Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 969-96, November.
  6. Chauvet, Marcelle & Potter, Simon, 2000. "Coincident and leading indicators of the stock market," Journal of Empirical Finance, Elsevier, vol. 7(1), pages 87-111, May.
  7. Chang-Jin Kim & Charles R. Nelson, 1999. "State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262112388, January.
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Cited by:
  1. repec:ebl:ecbull:v:3:y:2002:i:20:p:1-20 is not listed on IDEAS
  2. Paul Viefers, 2011. "Bayesian Inference for the Mixed-Frequency VAR Model," Discussion Papers of DIW Berlin 1172, DIW Berlin, German Institute for Economic Research.

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