Research Repository

Large time-varying parameter VARs

Koop, G and Korobilis, D (2013) 'Large time-varying parameter VARs.' Journal of Econometrics, 177 (2). 185 - 198. ISSN 0304-4076

[img]
Preview
Text
73719.pdf - Accepted Version

Download (455kB) | Preview

Abstract

In this paper, we develop methods for estimation and forecasting in large time-varying parameter vector autoregressive models (TVP-VARs). To overcome computational constraints, we draw on ideas from the dynamic model averaging literature which achieve reductions in the computational burden through the use forgetting factors. We then extend the TVP-VAR so that its dimension can change over time. For instance, we can have a large TVP-VAR as the forecasting model at some points in time, but a smaller TVP-VAR at others. A final extension lies in the development of a new method for estimating, in a time-varying manner, the parameter(s) of the shrinkage priors commonly-used with large VARs. These extensions are operationalized through the use of forgetting factor methods and are, thus, computationally simple. An empirical application involving forecasting inflation, real output and interest rates demonstrates the feasibility and usefulness of our approach. © 2013 Elsevier B.V. All rights reserved.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Jim Jamieson
Date Deposited: 23 Nov 2016 12:20
Last Modified: 07 Aug 2019 21:15
URI: http://repository.essex.ac.uk/id/eprint/17953

Actions (login required)

View Item View Item