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Opening the black box: Structural factor models with large cross sections

par Forni, Mario;Giannone, Domenico ;Lippi, Marco;Reichlin, Lucrezia
Référence Econometric theory, 25, 5, page (1319-1347)
Publication Publié, 2009-10

Article révisé par les pairs

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Résumé :

This paper shows how large-dimensional dynamic factor models are suitable for structural analysis. We argue that all identification schemes employed in structural vector autoregression (SVAR) analysis can be easily adapted in dynamic factor models. Moreover, the problem of fundamentalness, which is intractable in SVARs, can be solved, provided that the impulse-response functions are sufficiently heterogeneous. We provide consistent estimators for the impulse-response functions and for (n, T) rates of convergence. An exercise with U.S. macroeconomic data shows that our solution of the fundamentalness problem may have important empirical consequences. © 2009 Copyright Cambridge University Press 2009.