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Dynamic factor models

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  • Breitung, Jörg
  • Eickmeier, Sandra

Abstract

Factor models can cope with many variables without running into scarce degrees of freedom problems often faced in a regression-based analysis. In this article we review recent work on dynamic factor models that have become popular in macroeconomic policy analysis and forecasting. By means of an empirical application we demonstrate that these models turn out to be useful in investigating macroeconomic problems. --

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Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2005,38.

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Date of creation: 2005
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Handle: RePEc:zbw:bubdp1:4232

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Keywords: Principal components; dynamic factors; forecasting;

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