Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/98718
Authors: 
Breitung, Jörg
Eickmeier, Sandra
Year of Publication: 
2014
Series/Report no.: 
Discussion Paper, Deutsche Bundesbank 11/2014
Abstract: 
This paper compares alternative estimation procedures for multi-level factor models which imply blocks of zero restrictions on the associated matrix of factor loadings. We suggest a sequential least squares algorithm for minimizing the total sum of squared residuals and a two-step approach based on canonical correlations that are much simpler and faster than Bayesian approaches previously employed in the literature. Monte Carlo simulations suggest that the estimators perform well in typical sample sizes encountered in the factor analysis of macroeconomic data sets. We apply the methodologies to study international comovements of business and financial cycles as well as asymmetries over the business cycle in the US.
Subjects: 
factor models
canonical correlations
international business cycles
financial cycles
business cycle asymmetries
JEL: 
C38
C55
ISBN: 
978-3-95729-033-5
Document Type: 
Working Paper

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