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Bayesian forecasting using stochastic search variable selection in a VAR subject to breaks

Jochmann, Markus and Koop, Gary and Strachan, Rodney W. (2008) Bayesian forecasting using stochastic search variable selection in a VAR subject to breaks. Working paper. University of Strathclyde. (Unpublished)

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Abstract

This paper builds a model which has two extensions over a standard VAR. The �rst of these is stochastic search variable selection, which is an automatic model selection device which allows for coefficients in a possibly over-parameterized VAR to be set to zero. The second allows for an unknown number of structual breaks in the VAR parameters. We investigate the in-sample and forecasting performance of our model in an application involving a commonly-used US macro-economic data set. We �nd that, in-sample, these extensions clearly are warranted. In a recursive forecasting exercise, we �nd moderate improvements over a standard VAR, although most of these improvements are due to the use of stochastic search variable selection rather than the inclusion of breaks.

Item type: Monograph (Working paper)
ID code: 7733
Notes: Also published in: International Journal of Forecasting (2010), 26 (2), pp326-347. (This is a variant record)
Keywords: Bayesian forecasting, forecasting, stochastic search, variable selection, economic theory, Economic Theory
Subjects: Social Sciences > Economic Theory
Department: Strathclyde Business School > Economics
Depositing user: Strathprints Administrator
Date Deposited: 18 Mar 2009 16:28
Last modified: 22 May 2015 08:50
Related URLs:
URI: http://strathprints.strath.ac.uk/id/eprint/7733

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