Professor of Economics - London Business School
A Two-step Estimator for Large Approximate Dynamic Factor Models Based on Kalman Filtering
Reichlin, L., Giannone, D., Doz, C.
Date Published: 2011
This paper shows consistency of a two-step estimation of the factors in a dynamic approximate factor model when the panel of time series is large (n large). In the first step, the parameters of the model are estimated from an OLS on principal components. In the second step, the factors are estimated via the Kalman smoother. The analysis develops the theory for the estimator considered in Giannone etÂ al. (2004) and Giannone etÂ al. (2008) and for the many empirical papers using this framework for nowcasting.
Reichlin, L., Giannone, D., Doz, C. "A Two-step Estimator for Large Approximate Dynamic Factor Models Based on Kalman Filtering", Journal of Econometrics 2011
Search Google Scholar for this entry