Diebold, Rudebusch, Aruoba Latent Factor Model

[TomDoan]

This is a replication file for Diebold, Rudebusch & Aruoba (2006), "The macroeconomy and the yield curve: a dynamic latent factor approach," Journal of Econometrics, vol. 131(1-2), pages 309-338. It should be a simple modification to switch the data sets. You might have to change the guess values for mu, but everything else should go through the same as with this. The estimation behavior seems to be especially sensitive to the choice of mu if the data are near unit-root; it doesn't seem to be as sensitive to the guess values for the variances.

Program:

drajoe2006.rpf

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Data file:

DRA Data.txt

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