Linear System Challenges of Dynamic Factor Models

Abstract

A survey is provided dealing with the formulation of modelling problems for dynamic factor models, and the various algorithm possibilities for solving these modelling problems. Emphasis is placed on understanding requirements for the handling of errors, noting the relevance of the proposed application of the model, be it for example prediction or business cycle determination. Mixed frequency problems are also considered, in which certain entries of an underlying vector process are only available for measurement at a submultiple frequency of the original process. Certain classes of processes are shown to be generically identifiable, and others not to have this property.