Koop, G and Korobilis, D (2013) Large Time-Varying Parameter VARs. Journal of Econometrics, 177 (2). pp. 185-198. DOI https://doi.org/10.1016/j.jeconom.2013.04.007
Koop, G and Korobilis, D (2013) Large Time-Varying Parameter VARs. Journal of Econometrics, 177 (2). pp. 185-198. DOI https://doi.org/10.1016/j.jeconom.2013.04.007
Koop, G and Korobilis, D (2013) Large Time-Varying Parameter VARs. Journal of Econometrics, 177 (2). pp. 185-198. DOI https://doi.org/10.1016/j.jeconom.2013.04.007
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.
Item Type: | Article |
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Additional Information: | NOTICE: this is the author's version of a work that was accepted for publication in Journal of Econometrics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication |
Uncontrolled Keywords: | Bayesian VAR; Forecasting; Time-varying coefficients; State-space model |
Subjects: | H Social Sciences > HB Economic Theory |
Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Essex Business School |
SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
Depositing User: | Unnamed user with email elements@essex.ac.uk |
Date Deposited: | 23 Nov 2016 12:20 |
Last Modified: | 16 May 2024 17:46 |
URI: | http://repository.essex.ac.uk/id/eprint/17953 |
Available files
Filename: 73719.pdf