Identification of Macroeconomic Factors in Large Panels

Lasse Bork, Hans Dewachter and Romain Houssa

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: 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 developped. 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.

Keywords: Monetary policy; Business Cycles; Factor Models; EM Algorithm (search for similar items in EconPapers)
JEL-codes: C33 C51 E3 E43 E52 (search for similar items in EconPapers)
Pages: 43
Date: 2009-09-01
New Economics Papers: this item is included in nep-bec, nep-cba, nep-ecm, nep-ets and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Working Paper: Identification of macroeconomic factors in large panels (2009)
Working Paper: Identification of Macroeconomic Factors in Large Panels (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2009-43

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