Opening the Black Box: Structural Factor Models versus Structural VARs

  • Mario Dipartimento, Economia Politica
  • Published 2007

Abstract

In this paper we study identification in dynamic factor models and argue that factor models are better suited than VARs to provide a structural representation of the macroeconomy. Factor models distinguish measurement errors and other idiosyncratic disturbances from structural macroeconomic shocks. As a consequence, the number of structural shocks is no… (More)

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