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Forecasting with High-Dimensional Panel VARs

Koop, G and Korobilis, D (2018) Forecasting with High-Dimensional Panel VARs. Working Paper. Essex Finance Centre Working Papers, Colchester. (Unpublished)

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Abstract

This paper develops methods for estimating and forecasting in Bayesian panel vector autoregressions of large dimensions with time-varying parameters and stochastic volatility. We exploit a hierarchical prior that takes into account possible pooling restrictions involving both VAR coeffcients and the error covariance matrix, and propose a Bayesian dynamic learning procedure that controls for various sources of model uncertainty. We tackle computational concerns by means of a simulation-free algorithm that relies on an analytical approximation of the posterior distribution. We use our methods to forecast inflation rates in the eurozone and show that forecasts from our flexible specification are superior to alternative methods for large vector autoregressions.

Item Type: Monograph (Working Paper)
Uncontrolled Keywords: Panel VAR, inflation forecasting, Bayesian, time-varying parameter model
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Elements
Date Deposited: 01 Feb 2018 16:19
Last Modified: 07 Aug 2019 21:15
URI: http://repository.essex.ac.uk/id/eprint/21329

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