Dynamic Factor Models, Cointegration, and Error Correction Mechanisms

Matteo Barigozzi, Marco Lippi, Matteo Luciani

The paper studies Non-Stationary Dynamic Factor Models such that the factors ${\mathbf{F}}_t$ are $I(1)$ and singular, i.e. ${\mathbf{F}}_t$ has dimension $r$ and is driven by a $q$-dime…