nowcasting (version 1.1.4)

ICshocks: Information criterion for determining the number of shocks in a factor model

Description

The function gives the number of shocks that minimizes the information criterion.

Usage

ICshocks(x, r = NULL, p = NULL, delta = 0.1, m = 1)

Arguments

x

a dataset;

r

a positive integer corresponding to the number of factors;

p

a positive integer corresponding to the number of lags to be considered within the model.

delta

a real number within the range (0,1/2) for the sensitivity of the tolerance level to the size of the dataset;

m

a finite positive real number defining the tolerance level;

Value

A list containing two elements:

q_star

The number of shocks minimizing the information criterion;

p

The number of lags used.

References

Bai, J., Ng, S. (2007). Determining the Number of Primitive Shocks in Factor Models. Journal of Business & Economic Statistics, 25(1), 52-60. <https://doi.org/10.1198/073500106000000413>