Dynamic Factor Models

40 Pages Posted: 30 Nov 2005

See all articles by Jörg Breitung

Jörg Breitung

University of Bonn; Deutsche Bundesbank

Sandra Eickmeier

Deutsche Bundesbank; Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

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Abstract

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.

Keywords: Principal components, dynamic factors, forecasting

JEL Classification: C13, C33, C51

Suggested Citation

Breitung, Jörg and Eickmeier, Sandra, Dynamic Factor Models. Journal of the German Statistical Society, Vol. 90, No. 1, pp. 27-40, 2006, Available at SSRN: https://ssrn.com/abstract=855224

Jörg Breitung

University of Bonn ( email )

Postfach 2220
Bonn, D-53012
Germany

Deutsche Bundesbank

Wilhelm-Epstein-Strasse 14
Frankfurt/Main D-60431
Germany

Sandra Eickmeier (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Strasse 14
Frankfurt/Main D-60431
Germany

Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA) ( email )