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A dynamic index model for large cross sections

By Danny Quah and Thomas J Sargent

Abstract

This paper shows how standard methods can be used to formulate and estimate a dynamic index model for random fields - stochastic processes indexed by time and cross section where the time-series and cross section dimensions are comparable in magnitude. We use these study dynamic co-movements of sectoral employment in the US economy. The dynamics of employment in sixty sectors is well explained using only two unobservable factors; those factors are also strongly correlated with GNP growth

Topics: HB Economic Theory
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Year: 1993
OAI identifier: oai:eprints.lse.ac.uk:2044
Provided by: LSE Research Online
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