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A simplified approach in FAVAR estimation

In the field of empirical macroeconomics factor-augmented vector autoregressive (FAVAR) models have become a popular tool in explaining how economic variables interact over time. FAVAR is based upon a data-reduction step using factor estimation, which are then employed in a vector autoregressive model. This paper aims to study alternative methods regarding factor estimation. More precisely, we compare the generally used principal component method with the uncomplicated common correlated effect estimation. Results show low divergence between the two factor estimation methods employed, indicating interchangeability between the two estimation approaches.

Identiferoai:union.ndltd.org:UPSALLA1/oai:DiVA.org:uu-353035
Date January 2018
CreatorsLien Oskarsson, Mathias, Lin, Christopher
PublisherUppsala universitet, Statistiska institutionen, Uppsala universitet, Statistiska institutionen
Source SetsDiVA Archive at Upsalla University
LanguageEnglish
Detected LanguageEnglish
TypeStudent thesis, info:eu-repo/semantics/bachelorThesis, text
Formatapplication/pdf
Rightsinfo:eu-repo/semantics/openAccess

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