Banerjee, Anindya; Marcellino, Massimiliano; Masten, Igor - C.E.P.R. Discussion Papers - 2014
Starting from the dynamic factor model for non-stationary data we derive the factor-augmented error correction model (FECM) and, by generalizing the Granger representation theorem, its moving-average representation. The latter is used for the identification of structural shocks and their...