
Hi
I know you can do a DFM model with the FAVAR() object together with the filter commend in IRIS.
I am looking to estimate a model of the form:
y(t) = Cx(t) + y_bar +alphaZ(t) +u(t)
x(t) = Ax(t1) + Be(t)
In essence I am trying to construct a financial conditions index (FCI), where the estimated factor (x(t)) is the FCI. But I want to abstract from the feedback from GDP growth (Z) on the observables  hence the inclusion of Z(t) in the signal equation.
Any help on how to do this would be appreciated!
Regards
Harri

