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Dynamic factor models

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  • Jörg Breitung
  • Sandra Eickmeier

Abstract

Factor models can cope with many variables without running into scarce degrees of freedom problems often faced in a regression-based analysis. In this article we review recent work on dynamic factor models that have become popular in macroeconomic policy analysis and forecasting. By means of an empirical application we demonstrate that these models turn out to be useful in investigating macroeconomic problems.
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Suggested Citation

  • Jörg Breitung & Sandra Eickmeier, 2006. "Dynamic factor models," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 90(1), pages 27-42, March.
  • Handle: RePEc:spr:alstar:v:90:y:2006:i:1:p:27-42
    DOI: 10.1007/s10182-006-0219-z
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    More about this item

    Keywords

    Principal components; dynamic factors; forecasting. JEL C13; C33; C51;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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