The estimation of factors in FAVAR models
(2017) NEKP01 20171Department of Economics
- Abstract (Swedish)
- The use of factor-augmented vector autoregression (FAVAR) models has become increasingly popular in the literature of empirical macroeconomics. This paper sheds light on the different factor estimation methods that are available to researchers. More specifically, this paper examines the widely used principal component method but also the computationally simpler common correlated effects method as well as the more advanced likelihood-based method using the Gibbs sampler. The results indicate very little difference between the principal component method and the common correlated effects method, which can facilitate the estimation of FAVAR models for researchers within the field of macroeconomics.
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/8909902
- author
- Berggren, Erik LU
- supervisor
- organization
- course
- NEKP01 20171
- year
- 2017
- type
- H2 - Master's Degree (Two Years)
- subject
- keywords
- Common correlated effects, principal component analysis, Gibbs sampling, impulse response, factor models
- language
- English
- id
- 8909902
- date added to LUP
- 2017-07-10 14:35:01
- date last changed
- 2017-07-10 14:35:01
@misc{8909902, abstract = {{The use of factor-augmented vector autoregression (FAVAR) models has become increasingly popular in the literature of empirical macroeconomics. This paper sheds light on the different factor estimation methods that are available to researchers. More specifically, this paper examines the widely used principal component method but also the computationally simpler common correlated effects method as well as the more advanced likelihood-based method using the Gibbs sampler. The results indicate very little difference between the principal component method and the common correlated effects method, which can facilitate the estimation of FAVAR models for researchers within the field of macroeconomics.}}, author = {{Berggren, Erik}}, language = {{eng}}, note = {{Student Paper}}, title = {{The estimation of factors in FAVAR models}}, year = {{2017}}, }