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Dynamic Factor Models

In: Modern Econometric Analysis

Author

Listed:
  • Jörg Breitung

    (Universität Bonn)

  • Sandra Eickmeier

    (Deutsche Bundesbank)

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.

Suggested Citation

  • Jörg Breitung & Sandra Eickmeier, 2006. "Dynamic Factor Models," Springer Books, in: Olaf Hübler & Jachim Frohn (ed.), Modern Econometric Analysis, chapter 3, pages 25-40, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-32693-9_3
    DOI: 10.1007/3-540-32693-6_3
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    as
    1. Sandra Eickmeier & Joerg Breitung, 2005. "How Synchronized are Central and East European Economies with the Euro Area? Evidence from a Structural Factor model�," TWI Research Paper Series 14, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
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    More about this item

    Keywords

    Monetary Policy; Factor Model; Euro Area; European Monetary Union; Idiosyncratic Component;
    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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