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A spectral EM algorithm for dynamic factor models

Gabriele Fiorentini (), Alessandro Galesi () and Enrique Sentana ()

No 1619, Working Papers from Banco de España

Abstract: We make two complementary contributions to efficiently estimate dynamic factor models: a frequency domain EM algorithm and a swift iterated indirect inference procedure for ARMA models with no asymptotic efficiency loss for any finite number of iterations. Although our procedures can estimate such models with many series without good initial values, near the optimum we recommend switching to a gradient method that analytically computes spectral scores using the EM principle. We successfully employ our methods to construct an index that captures the common movements of US sectoral employment growth rates, which we compare to the indices obtained by semiparametric methods

Keywords: indirect inference; Kalman filter; sectoral employment; spectral maximum likelihood; Wiener-Kolmogorov filter (search for similar items in EconPapers)
JEL-codes: C32 C38 C51 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2016-09
New Economics Papers: this item is included in nep-ets and nep-ore
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http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... /16/Fich/dt1619e.pdf First version, September 2016 (application/pdf)

Related works:
Journal Article: A spectral EM algorithm for dynamic factor models (2018) Downloads
Working Paper: A spectral EM algorithm for dynamic factor models (2015) Downloads
Working Paper: A Spectral EM Algorithm for Dynamic Factor Models (2014) Downloads
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