An overview of the factor-augmented error-correction model
Research output: Chapter in Book/Report/Conference proceeding › Chapter (peer-reviewed) › peer-review
Authors
Colleges, School and Institutes
External organisations
- Department of Economics, Bocconi University, Milan
- Department of Economics, University of Ljubljana
Abstract
The Factor-augmented Error-Correction Model (FECM) generalizes the factor-augmented VAR (FAVAR) and the Error-Correction Model (ECM), combining error-correction, cointegration and dynamic factor models. It uses a larger set of variables compared to the ECM and incorporates the long-run information lacking from the FAVAR because of the latter’s specification in differences. In this paper, we review the specification and estimation of the FECM, and illustrate its use for forecasting and structural analysis by means of empirical applications based on Euro Area and US data.
Details
| Original language | English |
|---|---|
| Title of host publication | Dynamic Factor Models |
| Editors | Siem Jan Koopman, Eric Hillebrand |
| Publication status | Published - 2016 |
Publication series
| Name | Advances in Econometrics |
|---|---|
| Publisher | Emerald |
| ISSN (Print) | 0731-9053 |
Keywords
- Factor-augmented error correction models, FAVAR, Dynamic factor models, cointegration, structural analysis