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We extract meaningful economic concepts from a high\u2010dimensional data set, which together with observed variables follow an unrestricted, reduced\u2010form VAR process. Including a comprehensive set of economic concepts allows reliable, fundamental structural analysis, even of the factor augmented VAR itself. We illustrate this by combining two structural identification methods to further analyze the model. To account for the shift in monetary policy instruments triggered by the Great Recession, we follow separate strategies to identify monetary policy shocks. Comparing ours to other parametric and non\u2010parametric factor estimates uncovers advantages of parametric sparse factor estimation in a high dimensional data environment. Besides meaningful factor extraction, we gain precision in the estimation of factor loadings.<\/jats:p>","DOI":"10.1002\/jae.2852","type":"journal-article","created":{"date-parts":[[2021,7,14]],"date-time":"2021-07-14T13:27:23Z","timestamp":1626269243000},"page":"989-1012","update-policy":"https:\/\/doi.org\/10.1002\/crossmark_policy","source":"Crossref","is-referenced-by-count":7,"title":["Reduced\u2010form factor augmented VAR\u2014Exploiting sparsity to include meaningful factors"],"prefix":"10.1002","volume":"36","author":[{"given":"Simon","family":"Beyeler","sequence":"first","affiliation":[{"name":"Swiss National Bank Zurich Switzerland"}],"role":[{"role":"author","vocabulary":"crossref"}]},{"given":"Sylvia","family":"Kaufmann","sequence":"additional","affiliation":[{"name":"Study Center Gerzensee Gerzensee Switzerland"}],"role":[{"role":"author","vocabulary":"crossref"}]}],"member":"311","published-online":{"date-parts":[[2021,9,6]]},"reference":[{"key":"e_1_2_9_2_1","doi-asserted-by":"publisher","DOI":"10.1080\/07350015.2015.1137760"},{"key":"e_1_2_9_3_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jfineco.2013.04.009"},{"issue":"3","key":"e_1_2_9_4_1","doi-asserted-by":"crossref","first-page":"338","DOI":"10.1080\/07350015.2000.10524875","article-title":"Bayesian dynamic factor models and portfolio allocation","volume":"18","author":"Aguilar O.","year":"2010","journal-title":"Journal of Business &, Economic Statistics"},{"key":"e_1_2_9_5_1","doi-asserted-by":"publisher","DOI":"10.1002\/jae.2443"},{"key":"e_1_2_9_6_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jeconom.2015.10.010"},{"key":"e_1_2_9_7_1","doi-asserted-by":"publisher","DOI":"10.1111\/1468-0262.00273"},{"key":"e_1_2_9_8_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jeconom.2008.08.010"},{"key":"e_1_2_9_9_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jeconom.2013.03.007"},{"key":"e_1_2_9_10_1","doi-asserted-by":"publisher","DOI":"10.1002\/jae.1137"},{"key":"e_1_2_9_11_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jedc.2012.09.009"},{"key":"e_1_2_9_12_1","first-page":"387","article-title":"Measuring the effects of monetary policy: A factor\u2010augmented vector autoregressive (FAVAR) approach","volume":"120","author":"Bernanke B. 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