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Dynamic factor models

  • Breitung, Jörg
  • Eickmeier, Sandra

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
Date of revision:
Handle: RePEc:zbw:bubdp1:4232
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  11. George Kapetanios, 2002. "Modelling Core Inflation for the UK Using a New Dynamic Factor Estimation Method and a Large Disaggregated Price Index Dataset," Working Papers 471, Queen Mary University of London, School of Economics and Finance.
  12. Jushan Bai, 2003. "Inferential Theory for Factor Models of Large Dimensions," Econometrica, Econometric Society, vol. 71(1), pages 135-171, January.
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  22. Mario Forni & Marc Hallin & Lucrezia Reichlin & Marco Lippi, 2000. "The generalised dynamic factor model: identification and estimation," ULB Institutional Repository 2013/10143, ULB -- Universite Libre de Bruxelles.
  23. Schumacher, Christian, 2005. "Forecasting German GDP using alternative factor models based on large datasets," Discussion Paper Series 1: Economic Studies 2005,24, Deutsche Bundesbank, Research Centre.
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