Factor-Augmented VARMA Models With Macroeconomic Applications
因子增强 VARMA 模型及其宏观经济应用
We study the relationship between vector autoregressive moving-average (VARMA) and factor representations of a vector stochastic process. We observe that, in general, vector time series and factors cannot both follow finite-order VAR models. Instead, a VAR factor dynamics induces a VARMA process, while a VAR process entails VARMA factors. We propose to combine factor and VARMA modeling by using factor-augmented VARMA (FAVARMA) models. This approach is applied to forecasting…