Econometric Analysis of High Dimensional VARs Featuring a Dominant Unit

M.H. Pesaran & A. Chudik
This paper extends the analysis of infinite dimensional vector autoregressive models (IVAR) proposed in Chudik and Pesaran (2010) to the case where one of the variables or the cross section units in the IVAR model is dominant or pervasive. This extension is not straightforward and involves several technical dificulties. The dominant unit influences the rest of the variables in the IVAR model both directly and indirectly, and its effects do not vanish even as the...
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