Dynamic factors in the presence of blocks |
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Authors: | Marc Hallin Roman Liška |
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Institution: | a ECARES (European Centre for Advanced Research in Economics and Statistics), Université libre de Bruxelles, CP 114, B-1050 Bruxelles, Belgiumb ORFE, Princeton University, United Statesc CentER, Tilburg University, Netherlandsd ECORE, Bruxelles and Louvain-la-Neuve, Belgiume Académie Royale de Belgique |
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Abstract: | Macroeconometric data often come under the form of large panels of time series, themselves decomposing into smaller but still quite large subpanels or blocks. We show how the dynamic factor analysis method proposed in Forni et al. (2000), combined with the identification method of Hallin and Liška (2007), allows for identifying and estimating joint and block-specific common factors. This leads to a more sophisticated analysis of the structures of dynamic interrelations within and between the blocks in such datasets, along with an informative decomposition of explained variances. The method is illustrated with an analysis of a dataset of Industrial Production Indices for France, Germany, and Italy. |
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Keywords: | C13 C33 C43 |
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