Sample interview questions: Can you discuss any experience you have with conducting counterfactual analysis using dynamic factor models?
Sample answer:
-
Experience with Dynamic Factor Models (DFMs):
-
Developed and estimated DFMs to analyze the effects of monetary policy shocks on macroeconomic variables such as output, inflation, and employment.
- Used DFMs to study the impact of fiscal policy changes on economic growth and unemployment.
- Applied DFMs to investigate the relationship between financial markets and the real economy.
-
Conducted counterfactual analysis using DFMs to assess the effects of alternative policy scenarios, such as different interest rate paths or fiscal stimulus packages.
-
Counterfactual Analysis using DFMs:
-
Estimated DFMs using Bayesian methods, which allowed for the incorporation of prior information and uncertainty about the model parameters.
- Used Markov chain Monte Carlo (MCMC) methods to generate draws from the posterior distribution of the model parameters.
- Conducted counterfactual analysis by simulating the DFM under different values of the policy variables of interest.
-
Evaluated the effects of the counterfactual scenarios on macroeconomic variables of interest, such as output, inflation, and em… Read full answer