convergenceDFM

convergenceDFM is an R package for convergence analysis in macro-financial panels, combining Dynamic Factor Models (DFM) with mean-reverting Ornstein-Uhlenbeck (OU) processes.

Main Features

• Dynamic Factor Models (DFM): Static and approximate estimation for large panels with VAR/VECM stability checks, Portmanteau tests, and out-of-sample \(R^2\).

• Cointegration analysis: Implementation of Johansen’s test.

• Ornstein-Uhlenbeck processes: Convergence and half-life estimation based on OU processes.

• Robust inference: HC/HAC sandwich-type estimators via the ‘sandwich’ package.

• Factor preselection: Methods based on Partial Least Squares (PLS).

• Visualization: Publication-ready graphics.

• Robustness tests: Complete suite of diagnostics and validation.

Installation

From CRAN

install.packages("convergenceDFM")

Development version (GitHub)

# install.packages("devtools")
devtools::install_github("your-username/convergenceDFM")

Optional dependency: cmdstanr

For advanced Bayesian features (optional), install cmdstanr:

install.packages("cmdstanr", 
                 repos = c("https://stan-dev.r-universe.dev", 
                          getOption("repos")))

Note: cmdstanr is not on CRAN and must be installed from the Stan repository. The main functionalities of the package do not require cmdstanr.

Basic Usage

library(convergenceDFM)

# Basic example (adjust according to your main functions)
# data <- prepare_panel_data(your_data)
# dfm_result <- estimate_dfm(data)
# ou_result <- estimate_ou_process(dfm_result)
# plot_convergence(ou_result)

For more examples, see the vignettes:

browseVignettes("convergenceDFM")

Package Structure

convergenceDFM/
├── R/                  # Source code
├── data/               # Package datasets
├── inst/               # Additional package files
├── man/                # Documentation (auto-generated by roxygen2)
├── tests/              # Tests with testthat (edition 3)
├── vignettes/          # Vignettes and tutorials
├── DESCRIPTION         # Package metadata
├── LICENSE             # License file
├── NAMESPACE           # Package namespace (auto-generated)
├── NEWS.md             # Changelog
└── README.md           # This file

Development

• Documentation: Generated with roxygen2.

• Tests: Complete suite with testthat.

References

The package implements methods from:

• Forni, M., Hallin, M., Lippi, M., & Reichlin, L. (2000). “The Generalized Dynamic-Factor Model: Identification and Estimation.” Review of Economics and Statistics, 82(4), 540-554.

• Stock, J. H., & Watson, M. W. (2002). “Forecasting Using Principal Components From a Large Number of Predictors.” Journal of the American Statistical Association, 97(460), 1167-1179.

• Johansen, S. (1988). “Statistical analysis of cointegration vectors.” Journal of Economic Dynamics and Control, 12(2-3), 231-254.

• Uhlenbeck, G. E., & Ornstein, L. S. (1930). “On the Theory of the Brownian Motion.” Physical Review, 36(5), 823.

• Vasicek, O. (1977). “An equilibrium characterization of the term structure.” Journal of Financial Economics, 5(2), 177-188.

• Zeileis, A. (2004). “Econometric Computing with HC and HAC Covariance Matrix Estimators.” Journal of Statistical Software, 11(10), 1-17.

• Mevik, B.-H., & Wehrens, R. (2007). “The pls Package: Principal Component and Partial Least Squares Regression in R.” Journal of Statistical Software, 18(2), 1-23.

License

This package is free and open source software, licensed under GPL-3.

Author

José Mauricio Gómez Julián
Email: isadorenabi@pm.me