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Dynamic Factor Models: A review of the Literature

  • Barhoumi, K.
  • Darné, O.
  • Ferrara, L.

For few years, the increasing size of available economic and financial databases has led econometricians to develop and adapt new methods in order to efficiently summarize information contained in those large datasets. Among those methods, dynamic factor models have known a rapid development and a large success among macroeconomists. In this paper, we carry out a review of the recent literature on dynamic factor models. First we present the models used, then the parameter estimation methods and finally the statistical tests available to choose the number of factors. In the last section, we focus on recent empirical applications, especially dealing with the building of economic outlook indicators, macroeconomic forecasting and macroeconomic and monetary policy analyses.

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Paper provided by Banque de France in its series Working papers with number 430.

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Length: 61 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:bfr:banfra:430
Contact details of provider: Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/

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