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This paper investigates structural identification and residual-based bootstrap inference schemes for impulse response functions (IRFs) in factor-augmented vector autoregressions (FAVARs). I first discuss general conditions for structural identification, which also resolve the random rotation of...
Persistent link: https://www.econbiz.de/10010614055
Time instability in factor loadings can induce an overfitting problem in forecasting analyses since the structural change in factor loadings inflates the number of principal components and thus produces spurious factors. This paper proposes an algorithm to estimate non-spurious factors by...
Persistent link: https://www.econbiz.de/10010633049
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