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Model uncertainty in Panel Vector Autoregressive models

Koop, G and Korobilis, D (2016) 'Model uncertainty in Panel Vector Autoregressive models.' European Economic Review, 81. 115 - 131. ISSN 0014-2921

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Abstract

© 2015 Elsevier B.V. We develop methods for Bayesian model averaging (BMA) or selection (BMS) in Panel Vector Autoregressions (PVARs). Our approach allows us to select between or average over all possible combinations of restricted PVARs where the restrictions involve interdependencies between and heterogeneities across cross-sectional units. The resulting BMA framework can find a parsimonious PVAR specification, thus dealing with overparameterization concerns. We use these methods in an application involving the euro area sovereign debt crisis and show that our methods perform better than alternatives. Our findings contradict a simple view of the sovereign debt crisis which divides the euro zone into groups of core and peripheral countries and worries about financial contagion within the latter group.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Jim Jamieson
Date Deposited: 23 Nov 2016 11:49
Last Modified: 01 Feb 2019 16:15
URI: http://repository.essex.ac.uk/id/eprint/17946

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