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Inferential Theory for Generalized Dynamic Factor Models

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  • Matteo Barigozzi
  • Marc Hallin
  • Matteo Luciani
  • Paolo Zaffaroni

Abstract

We provide the asymptotic distributional theory for the so-called General or Generalized Dynamic Factor Model (GDFM), laying the foundations for an inferential approach in the GDFM analysis of high-dimensional time series. Our results are exploiting the duality between common shocksand dynamic loadings under a random cross-section approach to derive the asymptotic distribution of a class of estimators for common shocks, dynamic loadings, common components, and impulse response functions. An empirical application aimed at the construction of a “core” inflation indicator for the U.S. economy is presented, empirically demonstrating the superiority of the GDFM-based indicator over the most commonly adopted approaches, outperforming, in particular, the one based on Principal Components.

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  • Matteo Barigozzi & Marc Hallin & Matteo Luciani & Paolo Zaffaroni, 2021. "Inferential Theory for Generalized Dynamic Factor Models," Working Papers ECARES 2021-20, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:eca:wpaper:2013/331192
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    Cited by:

    1. Matteo Barigozzi & Marc Hallin, 2024. "The Dynamic, the Static, and the Weak Factor Models and the Analysis of High-Dimensional Time Series," Working Papers ECARES 2024-14, ULB -- Universite Libre de Bruxelles.
    2. Philipp Gersing, 2024. "A Distributed Lag Approach to the Generalised Dynamic Factor Model (GDFM)," Papers 2410.20885, arXiv.org.
    3. Philipp Gersing, 2024. "On the Existence of One-Sided Representations in the Generalised Dynamic Factor Model," Papers 2410.18159, arXiv.org.

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    More about this item

    Keywords

    High-dimensional time series; Generalized Dynamic Factor Models; One-sided representations of dynamic factor models; Asymptotic distribution; Confidence intervals;
    All these keywords.

    JEL classification:

    • C0 - Mathematical and Quantitative Methods - - General
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • E0 - Macroeconomics and Monetary Economics - - General

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