Hostname: page-component-cc8bf7c57-qfg88 Total loading time: 0 Render date: 2024-12-11T22:17:47.093Z Has data issue: false hasContentIssue false

Implications of Aggregation with Common Factors

Published online by Cambridge University Press:  11 February 2009

C. W. J. Granger
Affiliation:
University of California, San Diego

Abstract

Many observed macrovariables are simple aggregates over a large number of microunits. It is pointed out that the generating process of the macrovariables is largely determined by the common factors in the generating mechanisms of the microvariables, even though these factors may be very unimportant at the microlevel. It follows that macrorelationships are simpler than the complete microrelationships, but that empirical investigations of microrelationships may not catch those components, containing common factors, which will determine the macrorelationship. It is also shown that an aggregate expectation or forecast is simply the common factor component of the individual agents expectations.

Type
Articles
Copyright
Copyright © Cambridge University Press 1987

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1.Aigner, D.J. & Goldfeld, S.M.. Estimation and prediction from aggregate data when aggregates are measured more accurately than their components. Econometrica 42 (1974): 113134.CrossRefGoogle Scholar
2.Deaton, A. & Muellbauer, J.. Economics and consumer behavior. New York: Cambridge University Press, 1980.CrossRefGoogle Scholar
3.Erdelyi, A., et al. Higher trancendentalfunctions (Bateman Manuscript Project). New York: McGraw-Hill, 1953.Google Scholar
4.Granger, C.W.J.Long-memory relationships and the aggregation of dynamic models. Journal of Econometrics 14 (1980): 227238.CrossRefGoogle Scholar
5.Granger, C.W.J. Are economic variables really integrated of order one? In MacNeill, I.B. & Umphrey, G.J. (eds.). Time series and econometric modelling. Boston: D. Reidel, 1987.Google Scholar
6.Granger, C.W.J. & Newbold, P.. Forecasting transformed series. Journal of The Royal Statistical Society B38 (1976): 189203.Google Scholar
7.Muellbauer, J.Community preferences and the representative consumer. Econometrica 44 (1976): 979999.CrossRefGoogle Scholar
8.Powell, J.L. & Stoker, T.M.. The estimation of complete aggregation structures. Journal of Econometrics 30 (1985): 317344.CrossRefGoogle Scholar
9.Stoker, T.M.Completeness, distribution restrictions, and the form of aggregate functions. Econometrica 52 (1984): 887907.CrossRefGoogle Scholar