Dynamic factor models in estimation and forecasting

Abstract

This thesis addresses the issue of the relative performance of dynamic factor models in finite samples in the presence of structural breaks. It extends an existing literature by considering new data sets and evaluating finite sample properties of dynamic factor models and factor-augmented VARs and VECMs in Monte Carlo exercises. Chapter 1 Forecasting Emerging Market Indicators: Brazil and Russia Chapter 2 Co-Breaking and Forecasting Performance of Factor Models Chapter 3 Factor Augmented Error Correction Models