Efficient estimation of Bayesian VARMAs with time-varying coefficients
Joshua Chan and
Eric Eisenstat
CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University
Abstract:
Empirical work in macroeconometrics has been mostly restricted to using VARs, even though there are strong theoretical reasons to consider general VARMAs. A number of articles in the last two decades have conjectured that this is because estimation of VARMAs is perceived to be challenging and proposed various ways to simplify it. Nevertheless, VARMAs continue to be largely dominated by VARs, particularly in terms of developing useful extensions. We address these computational challenges with a Bayesian approach. Specifically, we develop a Gibbs sampler for the basic VARMA, and demonstrate how it can be extended to models with time-varying VMA coefficients and stochastic volatility. We illustrate the methodology through a macroeconomic forecasting exercise. We show that in a class of models with stochastic volatility, VARMAs produce better density forecasts than VARs, particularly for short forecast horizons.
Keywords: state space; stochastic volatility; factor model; macroeconomic forecasting; density forecast (search for similar items in EconPapers)
JEL-codes: C11 C32 C53 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2015-06
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-for and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)
Downloads: (external link)
https://cama.crawford.anu.edu.au/sites/default/fil ... 5_chan_eisenstat.pdf (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2015-19
Access Statistics for this paper
More papers in CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University Contact information at EDIRC.
Bibliographic data for series maintained by Cama Admin ().