Using VARs and TVP-VARs with Many Macroeconomic Variables

Koop, Gary (2013) Using VARs and TVP-VARs with Many Macroeconomic Variables. Discussion paper. University of Strathclyde, Glasgow.

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Abstract

This paper discusses the challenges faced by the empirical macroeconomist and methods for surmounting them. These challenges arise due to the fact that macroeconometric models potentially include a large number of variables and allow for time variation in parameters. These considerations lead to models which have a large number of parameters to estimate relative to the number of observations. A wide range of approaches are surveyed which aim to overcome the resulting problems. We stress the related themes of prior shrinkage, model averaging and model selection. Subsequently, we consider a particular modelling approach in detail. This involves the use of dynamic model selection methods with large TVP-VARs. A forecasting exercise involving a large US macroeconomic data set illustrates the practicality and empirical success of our approach.

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• Item metadata

  Item type:	Monograph(Discussion paper)
  ID code:	68110
  Dates:	Date Event 14 January 2013 Published
  Notes:	Published as a paper within the Discussion Papers in Economics, No. 13-03 (2013)
  Subjects:	Social Sciences > Economic Theory
  Department:	Strathclyde Business School > Economics
  Depositing user:	Pure Administrator
  Date deposited:	29 May 2019 13:09
  Last modified:	09 Apr 2024 04:43
  URI:	https://strathprints.strath.ac.uk/id/eprint/68110