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Dynamic Factor Models

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  • Catherine Doz

    () (Paris School of Economics and University Paris)

  • Peter Fuleky

    () (Department of Economics, University of Hawaii at Manoa, UHERO)

Abstract

Dynamic factor models are parsimonious representations of relationships among time series variables. With the surge in data availability, they have proven to be indispensable in macroeconomic forecasting. This chapter surveys the evolution of these models from their pre-big-data origins to the large-scale models of recent years. We review the associated estimation theory, forecasting approaches, and several extensions of the basic framework.

Suggested Citation

  • Catherine Doz & Peter Fuleky, 2019. "Dynamic Factor Models," Working Papers 2019-4, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
  • Handle: RePEc:hae:wpaper:2019-4
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    File URL: http://www.uhero.hawaii.edu/assets/UHEROwp1904.pdf
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    More about this item

    Keywords

    dynamic factor models; big data; two-step estimation; time domain; frequency domain; structural breaks;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis

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