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

39 Pages Posted: 5 Jul 2006

See all articles by George Kapetanios

George Kapetanios

King's College, London

Massimiliano Giuseppe Marcellino

Bocconi University - Department of Economics; Centre for Economic Policy Research (CEPR)

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Date Written: April 2006

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.

Keywords: Factor models, principal components, subspace algorithms, structural identification, structural VAR

JEL Classification: C32, C51, E52

Suggested Citation

Kapetanios, George and Marcellino, Massimiliano, Impulse Response Functions from Structural Dynamic Factor Models: A Monte Carlo Evaluation (April 2006). CEPR Discussion Paper No. 5621, Available at SSRN: https://ssrn.com/abstract=914165

George Kapetanios

King's College, London ( email )

30 Aldwych
London, WC2B 4BG
United Kingdom
+44 20 78484951 (Phone)

Massimiliano Marcellino (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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