In this paper a new approach to factor vector autoregressive estimation, based on Stock and Watson (Implications of dynamic factor models for VAR analysis, NBER Working Paper, no. 11467, 2005), is introduced. In addition to sharing all the relevant features of the Stock-Watson approach, in its static formulation, the proposed method has the advantage of allowing for a more clear-cut interpretation of the global factors, as well as for the identification of all idiosyncratic shocks. An application to large-scale macroeconometric modelling is also provided. © 2008 Springer-Verlag.
Morana, C., Bagliano, F. (2008). Factor vector autoregressive estimation: A new approach. JOURNAL OF ECONOMIC INTERACTION AND COORDINATION, 3(1), 15-23 [10.1007/s11403-008-0028-4].
Factor vector autoregressive estimation: A new approach
MORANA, CLAUDIO;
2008
Abstract
In this paper a new approach to factor vector autoregressive estimation, based on Stock and Watson (Implications of dynamic factor models for VAR analysis, NBER Working Paper, no. 11467, 2005), is introduced. In addition to sharing all the relevant features of the Stock-Watson approach, in its static formulation, the proposed method has the advantage of allowing for a more clear-cut interpretation of the global factors, as well as for the identification of all idiosyncratic shocks. An application to large-scale macroeconometric modelling is also provided. © 2008 Springer-Verlag.
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