Essays on dynamic factor models and their application in macroeconometrics

This thesis explores novel applications of large-dimensional dynamic factor models to address key macroeconomic questions in a data-rich environment. Chapter 1 provides a measure of the Euro Area (EA) output gap using a large-dimensional non-stationary dynamic factor model applied to a newly assembled EA dataset. Chapter 2 examines the extent and severity of heterogeneity in downside risks to economic growth across the main EA countries through a factor-augmented quantile regression framework. Chapter 3 quantifies the dynamic effects of common monetary policy across EA countries using a novel large-dimensional dataset for the EA and its ten largest countries. Chapter 4 introduces EA-MD-QD, the large dataset employed throughout the thesis. By leveraging large datasets and modern econometric techniques, the thesis offers a rigorous, data-driven perspective on the macroeconomic stance of the EA and its principal economies.