The general dynamic factor model: One-sided representation results

Mario Forni and Marco Lippi

Journal of Econometrics, 2011, vol. 163, issue 1, 23-28

Abstract: Recent dynamic factor models have been almost exclusively developed under the assumption that the common components span a finite-dimensional vector space. However, this finite-dimension assumption rules out very simple factor-loading patterns and is therefore severely restrictive. The general case has been studied, using a frequency domain approach, in Forni et al. (2000). That paper produces an estimator of the common components that is consistent but is based on filters that are two-sided and therefore unsuitable for prediction. The present paper, assuming a rational spectral density for the common components, obtains a one-sided estimator without the finite-dimension assumption.

Keywords: Dynamic; factor; models; Frequency; domain; approach; Estimation; by; one-sided; filters (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (37)

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