Estimation and inference of dynamic structural factor models with over-identifying restrictions

Xu Han

Journal of Econometrics, 2018, vol. 202, issue 2, 125-147

Abstract: This paper develops a new estimator for the impulse response functions in structural factor models with a fixed number of over-identifying restrictions. The proposed identification scheme nests the conventional just-identified recursive scheme as a special case. We establish the asymptotic distributions of the new estimator and develop test statistics for the over-identifying restrictions. Simulation results show that adding a few more over-identifying restrictions can lead to a substantial improvement in estimation accuracy for impulse response functions at both zero and nonzero horizons. We estimate the effects of a monetary policy shock using a U.S. data set. The results show that our over-identified scheme can help to detect incorrect specifications that lead to spurious impulse responses.

Keywords: High-dimensional factor models; Identification and estimation; Structural impulse responses (search for similar items in EconPapers)
JEL-codes: C13 C33 E32 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:202:y:2018:i:2:p:125-147

DOI: 10.1016/j.jeconom.2017.09.001

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