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Dynamic Factor Models: A review of the Literature

Karim Barhoumi (), Olivier Darné and Laurent Ferrara ()

Working papers from Banque de France

Abstract: For few years, the increasing size of available economic and financial databases has led econometricians to develop and adapt new methods in order to efficiently summarize information contained in those large datasets. Among those methods, dynamic factor models have known a rapid development and a large success among macroeconomists. In this paper, we carry out a review of the recent literature on dynamic factor models. First we present the models used, then the parameter estimation methods and finally the statistical tests available to choose the number of factors. In the last section, we focus on recent empirical applications, especially dealing with the building of economic outlook indicators, macroeconomic forecasting and macroeconomic and monetary policy analyses.

Keywords: Dynamic factor models; estimation; tests for the number of factors; macroeconomic applications. (search for similar items in EconPapers)
JEL-codes: C13 C51 C32 E66 F44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-ets
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10) Track citations by RSS feed

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Journal Article: Dynamic factor models: A review of the literature (2014) Downloads
Working Paper: Dynamic factor models: A review of the literature (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:430

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