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FAVAR factors

Topics: FAVAR, VAR, SVAR, FAVAR
Aug 26, 2014 at 5:04 PM
Hi,

I'm wondering if you can point me towards any documentation that explains exactly how the FAVAR is working. I've gone through the tutorial, and dove into the code but it is still unclear.

From my understanding it will initially estimate the factors using pca and then estimate the model coefficients. Following this there is a forecast step using a Kalman Filter. So the estimated coefficients is transformed into statespace form then used in the filter. From here the forecasting is done.

Thanks for the assistance