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System Identification by Dynamic Factor Models

Author

Listed:
  • C. Heij

    (Econometric Institute, Erasmus University Rotterdam)

  • W. Scherrer

    (Institut für Ökonometrie, Operations Research und Systemtheorie, TU Wien, Austria)

  • M. Deistler

    (Institut für Ökonometrie, Operations Research und Systemtheorie, TU Wien, Austria)

Abstract

This paper is concerned with linear dynamic factor models. In such models the observed process is decomposed into a structural part called the latent process, and a remainder that is called noise. The observed variables are treated in a symmetric way, so that no distinction between inputs and outputs is required. This motivates the condition that also the prior assumptions on the noise are symmetric in nature. We investigate the relation between optimalmodels and the spectrum of the observed process. This concerns in particular properties of continuity and consistency. Several possible noise specifications and measures of fit are considered.

Suggested Citation

  • C. Heij & W. Scherrer & M. Deistler, 1998. "System Identification by Dynamic Factor Models," Tinbergen Institute Discussion Papers 98-001/4, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:19980001
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    References listed on IDEAS

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    1. Leamer, Edward E, 1987. "Errors in Variables in Linear Systems," Econometrica, Econometric Society, vol. 55(4), pages 893-909, July.
    2. Heij, C. & Scherrer, W. & Destler, M., 1996. "System Identification by Dynamic Factor Models," Econometric Institute Research Papers EI 9501-/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
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    Cited by:

    1. Heij, C. & Scherrer, W., 1996. "Consistency of System Identification by Global Total Least Squares," Econometric Institute Research Papers EI 9635-/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    2. Heij, C. & Scherrer, W., 1996. "Behavioural Approximation of Stochastic Processes by Rank Reduced Spectra," Econometric Institute Research Papers EI 9610/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    3. Heij, C. & Scherrer, W. & Destler, M., 1996. "System Identification by Dynamic Factor Models," Econometric Institute Research Papers EI 9501-/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.

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