FAVAR (Factor-Augmented Vector Autoregression) Model Literature Review

Authors : Bige KÜÇÜKEFE, Dündar Murat DEMİRÖZ

Pages : 38-59

Doi:10.25295/fsecon.295547

View : 23 | Download : 11

Publication Date : 2017-05-30

Article Type : Research Paper

Abstract :In the Vector Autoregressive insert ignore into journalissuearticles values(VAR); models, which are widely used in economic studies and developed by Sims insert ignore into journalissuearticles values(1980);, impulse response functions can only be obtained from variables included only because of the infrequent use of information sets, and the dimensions of structural shocks can not be measured precisely. It is also not possible that for some variables to be represented by a single time series. The VAR estimation is insufficient for parsing operations involving large data sets. FAVAR insert ignore into journalissuearticles values(Factor Augmented Vector Autoregression); method was developed by Bernanke, Boivin and Eliasz insert ignore into journalissuearticles values(2005); and this method can use large data sets. In this study, FAVAR method is tried to be explained by comparing with VAR, and a literature search is being conducted in this subject.
Keywords : FAVAR, Monetary Policy, Transmission Mechanism