Factor Vector Autoregressive Estimation of Heteroskedastic Persistent and Non-Persistent Processes Subject to Structural Breaks31-07-2014
In the paper a general framework for large scale modeling of macroeconomic and financial time
series is introduced. The proposed approach is characterized by simplicity of implementation,
performing well independently of persistence and heteroskedasticity properties, accounting for
common deterministic and stochastic factors. Monte Carlo results strongly support the proposed
methodology, validating its use also for relatively small cross‐sectional and temporal samples.