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Large Bayesian VARMAs

Chan, Joshua C.C. and Eisenstat, Eric and Koop, Gary (2016) Large Bayesian VARMAs. Journal of Econometrics, 192 (2). ISSN 0304-4076

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Abstract

Vector Autoregressive Moving Average (VARMA) models have many theoretical properties which should make them popular among empirical macroeconomists. However, they are rarely used in practice due to over-parameterization concerns, difficulties in ensuring identification and computational challenges. With the growing interest in multivariate time series models of high dimension, these problems with VARMAs become even more acute, accounting for the dominance of VARs in this field. In this paper, we develop a Bayesian approach for inference in VARMAs which surmounts these problems. It jointly ensures identification and parsimony in the context of an efficient Markov chain Monte Carlo (MCMC) algorithm. We use this approach in a macroeconomic application involving up to twelve dependent variables. We find our algorithm to work successfully and provide insights beyond those provided by VARs.

Item type: Article
ID code: 56465
Keywords: VARMA identification, Markov chain Monte Carlo, Bayesian, stochastic search variable selection, Economic Theory, Economics, Econometrics and Finance(all)
Subjects: Social Sciences > Economic Theory
Department: Strathclyde Business School > Economics
Depositing user: Pure Administrator
Date deposited: 23 May 2016 09:32
Last modified: 12 May 2019 14:21
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URI: https://strathprints.strath.ac.uk/id/eprint/56465
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