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Forecasting with High-Dimensional Panel VARs

Koop, Gary and Korobilis, Dimitrios (2019) 'Forecasting with High-Dimensional Panel VARs.' Oxford Bulletin of Economics and Statistics, 81 (5). 937 - 959. ISSN 0305-9049

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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 coefficients 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 analytical approximations to the posterior. We use our methods to forecast inflation rates in the eurozone and show that these forecasts are superior to alternative methods for large vector autoregressions.

Item Type: Article
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: 04 Dec 2018 14:22
Last Modified: 17 Oct 2019 16:15
URI: http://repository.essex.ac.uk/id/eprint/23576

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