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A Random Matrix Approach to Dynamic Factors in macroeconomic data

Authors
  • Snarska, Małgorzata
Type
Published Article
Publication Date
Jan 31, 2012
Submission Date
Jan 31, 2012
Identifiers
arXiv ID: 1201.6544
Source
arXiv
License
Yellow
External links

Abstract

We show how random matrix theory can be applied to develop new algorithms to extract dynamic factors from macroeconomic time series. In particular, we consider a limit where the number of random variables N and the number of consecutive time measurements T are large but the ratio N / T is fixed. In this regime the underlying random matrices are asymptotically equivalent to Free Random Variables (FRV).Application of these methods for macroeconomic indicators for Poland economy is also presented.

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