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Changing Impact of Shocks: A Time‐Varying Proxy SVAR Approach

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  • HAROON MUMTAZ
  • KATERINA PETROVA
Abstract
In this paper, we extend the Bayesian Proxy vector autoregression (VAR) model to incorporate time variation in the parameters. A novel Metropolis‐within‐Gibbs sampling algorithm is provided to approximate the posterior distributions of the model's parameters. Using the proposed algorithm, we estimate the time‐varying effects of taxation shocks in the United States and the United Kingdom and find evidence for a decline in the impact of these shocks on output growth.

Suggested Citation

  • Haroon Mumtaz & Katerina Petrova, 2023. "Changing Impact of Shocks: A Time‐Varying Proxy SVAR Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(2-3), pages 635-654, March.
    • Handle: RePEc:wly:jmoncb:v:55:y:2023:i:2-3:p:635-654
    DOI: 10.1111/jmcb.12946
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    More about this item

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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