Type: Working Paper
An overview of the factor-augmented error-correction model
Working Paper, University of Birmingham, Department of Economics Discussion Papers, 2015/03
BANERJEE, Anindya, MARCELLINO, Massimiliano, MASTEN, Igor, An overview of the factor-augmented error-correction model, University of Birmingham, Department of Economics Discussion Papers, 2015/03 - http://hdl.handle.net/1814/39409
Retrieved from Cadmus, EUI Research Repository
The Factor-augmented Error Correction Model (FECM) generalizes the factoraugmented VAR (FAVAR) and the Error Correction Model (ECM), combining errorcorrection, 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.
Cadmus permanent link: http://hdl.handle.net/1814/39409
External link: http://www.birmingham.ac.uk/Documents/college-social-sciences/business/economics/2015-discussion-papers/15-03.pdf
Series/Number: University of Birmingham; Department of Economics Discussion Papers; 2015/03
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