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We show how to implement classical identification schemes based on long\u2010run restrictions in the case of large panels. The importance of the error correction mechanism for impulse response analysis is analyzed by means of both empirical examples and simulation experiments. Our results show that the bias in estimated impulse responses in a factor\u2010augmented vector autoregressive (FAVAR) model is positively related to the strength of the error correction mechanism and the cross\u2010section dimension of the panel. We observe empirically in a large panel of US data that these features have a substantial effect on the responses of several variables to the identified permanent real (productivity) and monetary policy shocks.<\/jats:p>","DOI":"10.1002\/jae.2570","type":"journal-article","created":{"date-parts":[[2017,5,3]],"date-time":"2017-05-03T08:56:49Z","timestamp":1493801809000},"page":"1069-1086","source":"Crossref","is-referenced-by-count":17,"title":["Structural FECM: Cointegration in large\u2010scale structural FAVAR models"],"prefix":"10.1002","volume":"32","author":[{"given":"Anindya","family":"Banerjee","sequence":"first","affiliation":[{"name":"Department of Economics University of Birmingham  Edgbaston, Birmingham UK"}],"role":[{"role":"author","vocabulary":"crossref"}]},{"given":"Massimiliano","family":"Marcellino","sequence":"additional","affiliation":[{"name":"Bocconi University IGIER and CEPR  Milan Italy"}],"role":[{"role":"author","vocabulary":"crossref"}]},{"given":"Igor","family":"Masten","sequence":"additional","affiliation":[{"name":"Faculty of Economics University of ljubljana  Ljubljana Slovenia"},{"name":"Bank of Slovenia  Slovenia Ljubljana"}],"role":[{"role":"author","vocabulary":"crossref"}]}],"member":"311","published-online":{"date-parts":[[2017,5,3]]},"reference":[{"key":"e_1_2_9_2_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jinteco.2007.01.003"},{"key":"e_1_2_9_3_1","doi-asserted-by":"publisher","DOI":"10.1198\/073500106000000585"},{"key":"e_1_2_9_4_1","doi-asserted-by":"publisher","DOI":"10.1214\/aoms\/1177729580"},{"key":"e_1_2_9_5_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jeconom.2003.10.022"},{"key":"e_1_2_9_6_1","doi-asserted-by":"publisher","DOI":"10.1111\/1468-0262.00273"},{"key":"e_1_2_9_7_1","doi-asserted-by":"publisher","DOI":"10.1111\/j.1468-0262.2004.00528.x"},{"key":"e_1_2_9_8_1","doi-asserted-by":"publisher","DOI":"10.1111\/j.1468-0262.2006.00696.x"},{"key":"e_1_2_9_9_1","doi-asserted-by":"publisher","DOI":"10.1198\/073500106000000413"},{"key":"e_1_2_9_10_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jeconom.2008.10.012"},{"key":"e_1_2_9_11_1","doi-asserted-by":"publisher","DOI":"10.1093\/acprof:oso\/9780199237197.003.0009"},{"key":"e_1_2_9_12_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.ijforecast.2013.01.009"},{"key":"e_1_2_9_13_1","unstructured":"Banerjee A. 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