Banerjee, Anindya; Marcellino, Massimiliano; Masten, Igor - Department of Economics, University of Birmingham - 2015
The Factor-augmented Error Correction Model (FECM) generalizes the factor-augmented VAR (FAVAR) and the Error Correction Model (ECM), combining error-correction, cointegration and dynamic factor models. It uses a larger set of variables compared to the ECM and incorporates the long-run...