Identification of Macroeconomic Factors in Large Panels
Aalborg University - Department of Business and Management
Catholic University of Leuven (KUL) - Department of Economics; Erasmus Research Institute of Management (ERIM)
CRED & CEREFIM, University of Namur
September 30, 2009
CREATES Research Paper No. 2009-43
This paper presents a dynamic factor model in which the extracted factors and shocks are given a clear economic interpretation. The economic interpretation of the factors is obtained by means of a set of over-identifying loading restrictions, while the structural shocks are estimated following standard practices in the SVAR literature. Estimators based on the EM algorithm are developed. We apply this framework to a large panel of US monthly macroeconomic series. In particular, we identify nine macroeconomic factors and discuss the economic impact of monetary policy stocks. The results are theoretically plausible and in line with other findings in the literature.
Number of Pages in PDF File: 45
Keywords: Monetary policy, Business Cycles, Factor Models, EM Algorithm
JEL Classification: E3, E43, C51, E52, C33working papers series
Date posted: October 1, 2009
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo4 in 0.328 seconds