DP5621 Impulse Response Functions from Structural Dynamic Factor Models: A Monte Carlo Evaluation

Author(s): George Kapetanios, Massimiliano Marcellino
Publication Date: April 2006
Keyword(s): factor models, principal components, structural identification, structural VAR, subspace algorithms
JEL(s): C32, C51, E52
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5621

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.