Determining the number of factors in the general dynamic factor model

• 成果类型: Article
• 署名作者: Hallin, Marc; Liska, Roman
• 署名单位: Universite Libre de Bruxelles; Universite Libre de Bruxelles; Universite Libre de Bruxelles
• 刊物名称: JOURNAL OF THE AMERICAN STATISTICAL ASSOCIATION
• ISSN/ISSBN: 0162-1459
• DOI: 10.1198/016214506000001275
• 发表日期: 2007
• 页码: 603-617
• 关键词: monetary-policy; principal components; real

摘要

This article develops an information criterion for determining the number q of common shocks in the general dynamic factor model developed by Form et al., as opposed to the restricted dynamic model considered by Bai and Ng and by Amengual and Watson. Our criterion is based on the fact that this number q is also the number of diverging eigenvalues of the spectral density matrix of the observations as the number n of series goes to infinity. We provide sufficient conditions for consistency of the criterion for large n and T (where T is the series length). We show how the method can be implemented and provide simulations and empirics illustrating its very good finite-sample performance. Application to real data adds a new empirical facet to an ongoing debate on the number of factors driving the U.S. economy.