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Inferential theory for generalized dynamic factor models

Author

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  • Barigozzi, Matteo
  • Hallin, Marc
  • Luciani, Matteo
  • Zaffaroni, Paolo
Abstract
We provide the asymptotic distributional theory for the so-called General or Generalized Dynamic Factor Model (GDFM), laying the foundations for an inferential approach in the GDFM analysis of high-dimensional time series. By exploiting the duality between common shocks and dynamic loadings, we derive the asymptotic distribution and associated standard errors for a class of estimators for common shocks, dynamic loadings, common components, and impulse response functions. We present an empirical application aimed at constructing a “core” inflation indicator for the U.S. economy, which demonstrates the superiority of the GDFM-based indicator over the most common approaches, particularly the one based on Principal Components.

Suggested Citation

  • Barigozzi, Matteo & Hallin, Marc & Luciani, Matteo & Zaffaroni, Paolo, 2024. "Inferential theory for generalized dynamic factor models," Journal of Econometrics, Elsevier, vol. 239(2).
    • Handle: RePEc:eee:econom:v:239:y:2024:i:2:s0304407623000593
    DOI: 10.1016/j.jeconom.2023.02.003
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    Cited by:

    1. Matteo Barigozzi & Marc Hallin, 2024. "The Dynamic, the Static, and the Weak Factor Models and the Analysis of High-Dimensional Time Series," Working Papers ECARES 2024-14, ULB -- Universite Libre de Bruxelles.
    2. Philipp Gersing, 2024. "A Distributed Lag Approach to the Generalised Dynamic Factor Model (GDFM)," Papers 2410.20885, arXiv.org.
    3. Philipp Gersing, 2024. "On the Existence of One-Sided Representations in the Generalised Dynamic Factor Model," Papers 2410.18159, arXiv.org.

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    More about this item

    Keywords

    High-dimensional time series; Generalized dynamic factor models; One-sided representations of dynamic factor models; Asymptotic distribution; Confidence intervals;
    All these keywords.

    JEL classification:

    • C0 - Mathematical and Quantitative Methods - - General
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • E0 - Macroeconomics and Monetary Economics - - General

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