Dynamic factor models: A review of the literature

Karim Barhoumi (barhoumi_karim@yahoo.fr), Olivier Darné and Laurent Ferrara

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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)
Date: 2013
Note: View the original document on HAL open archive server: https://hal.parisnanterre.fr/hal-01385974
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Citations: View citations in EconPapers (26)

Published in Journal of Business Cycle Measurement and Analysis, 2013, 2, pp.73 - 107. ⟨10.1787/jbcma-2013-5jz417f7b7nv⟩

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Related works:
Journal Article: Dynamic factor models: A review of the literature (2014)
Working Paper: Dynamic Factor Models: A review of the Literature (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01385974

DOI: 10.1787/jbcma-2013-5jz417f7b7nv

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