Principal Component Analysis for Nonstationary Series /

Hamilton, James D.

Principal Component Analysis for Nonstationary Series / James D. Hamilton, Jin Xi. - Cambridge, Mass. National Bureau of Economic Research 2024. - 1 online resource: illustrations (black and white); - NBER working paper series no. w32068 . - Working Paper Series (National Bureau of Economic Research) no. w32068. .

January 2024.

This paper develops a procedure for uncovering the common cyclical factors that drive a mix of stationary and nonstationary variables. The method does not require knowing which variables are nonstationary or the nature of the nonstationarity. An application to the FRED-MD macroeconomic dataset demonstrates that the approach offers similar benefits to those of traditional principal component analysis with some added advantages.




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