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

Author(s): George Kapetanios and Massimiliano Marcellino

Publication Date: April 2006

Keyword(s): factor models, principal components, structural identification, structural VAR and subspace algorithms

Programme Area(s): International Macroeconomics

Abstract: 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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Bibliographic Reference

Kapetanios, G and Marcellino, M. 2006. 'Impulse Response Functions from Structural Dynamic Factor Models: A Monte Carlo Evaluation'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5621