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Impulse Response Functions from Structural Dynamic Factor Models: A Monte Carlo Evaluation

  • Kapetanios, George
  • Marcellino, Massimiliano

The estimation of structural dynamic factor models (DFMs) for large sets of variables is attracting considerable attention. In this paper we briefly review the underlying theory and then compare the impulse response functions resulting from two alternative estimation methods for the DFM. Finally, as an example, we reconsider the issue of the identification of the driving forces of the US economy, using data for about 150 macroeconomic variables.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5621.

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Date of creation: Apr 2006
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Handle: RePEc:cpr:ceprdp:5621
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  1. Mario Forni & Domenico Giannone & Marco Lippi & Lucrezia Reichlin, 2007. "Opening the Black Box: Structural Factor Models with Large Cross-Sections," Center for Economic Research (RECent) 008, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
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