Advanced Search
MyIDEAS: Login to save this paper or follow this series

Large Bayesian VARs

Contents:

Author Info

  • Martha Banbura
  • Domenico Giannone
  • Lucrezia Reichlin

Abstract

This paper shows that Vector Autoregression with Bayesian shrinkage is an appropriate tool for large dynamic models. We build on the results by De Mol, Giannone, and Reichlin (2008) and show that, when the degree of shrinkage is set in relation to the cross-sectional dimension, the forecasting performance of small monetary VARs can be improved by adding additional macroeconomic variables and sectoral information. In addition, we show that large VARs with shrinkage produce credible impulse responses and are suitable for structural analysis.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/54095/1/RePEc_eca_wpaper_2008_033.pdf
Download Restriction: no

Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers ECARES with number 2008_033.

as in new window
Length: 37 p.
Date of creation: 2008
Date of revision:
Publication status: Published by:
Handle: RePEc:eca:wpaper:2008_033

Contact details of provider:
Postal: Av. F.D., Roosevelt, 39, 1050 Bruxelles
Phone: (32 2) 650 30 75
Fax: (32 2) 650 44 75
Web page: http://difusion.ulb.ac.be
More information through EDIRC

Related research

Keywords: Bayesian VAR; Forecasting; Monetary VAR; large cross-sections;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148 Elsevier.
  2. John C. Robertson & Ellis W. Tallman, 1999. "Vector autoregressions: forecasting and reality," Economic Review, Federal Reserve Bank of Atlanta, issue Q1, pages 4-18.
  3. Carlo Ambrogio Favero & Massimilano Marcellino & Francesca Neglia, . "Principal components at work: The empirical analysis of monetary policy with large datasets," Working Papers 223, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  4. Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-62, April.
  5. Litterman, Robert B, 1986. "Forecasting with Bayesian Vector Autoregressions-Five Years of Experience," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(1), pages 25-38, January.
  6. Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 1-78.
  7. D’Agostino, Antonello & Giannone, Domenico, 2006. "Comparing alternative predictors based on large-panel factor models," Working Paper Series 0680, European Central Bank.
  8. Giannone, Domenico & Reichlin, Lucrezia, 2006. "Does Information Help Recovering Structural Shocks from Past Observations?," CEPR Discussion Papers 5725, C.E.P.R. Discussion Papers.
  9. Forni, Mario & Hallin, Marc & Lippi, Marco & Reichlin, Lucrezia, 2005. "The Generalized Dynamic Factor Model: One-Sided Estimation and Forecasting," Journal of the American Statistical Association, American Statistical Association, vol. 100, pages 830-840, September.
  10. Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1986. "Forecasting and conditional projection using realistic prior distribution," Staff Report 93, Federal Reserve Bank of Minneapolis.
  11. Kadiyala, K Rao & Karlsson, Sune, 1997. "Numerical Methods for Estimation and Inference in Bayesian VAR-Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(2), pages 99-132, March-Apr.
  12. Giacomini, Raffaella & White, Halbert, 2003. "Tests of Conditional Predictive Ability," University of California at San Diego, Economics Working Paper Series qt5jk0j5jh, Department of Economics, UC San Diego.
  13. Fabio Canova & Matteo Ciccarelli, 2000. "Forecasting And Turning Point Predictions In A Bayesian Panel Var Model," Working Papers. Serie AD 2000-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  14. Domenico Giannone & Lucrezia Reichlin & Luca Sala, 2005. "Monetary policy in real time," ULB Institutional Repository 2013/6401, ULB -- Universite Libre de Bruxelles.
    • Domenico Giannone & Lucrezia Reichlin & Luca Sala, 2005. "Monetary Policy in Real Time," NBER Chapters, in: NBER Macroeconomics Annual 2004, Volume 19, pages 161-224 National Bureau of Economic Research, Inc.
  15. Canova, Fabio, 1991. "The Sources of Financial Crisis: Pre- and Post-Fed Evidence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(3), pages 689-713, August.
  16. Mackowiak, Bartosz, 2007. "External shocks, U.S. monetary policy and macroeconomic fluctuations in emerging markets," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2512-2520, November.
  17. Giannone, Domenico & Reichlin, Lucrezia & Small, David, 2005. "Nowcasting GDP and Inflation: The Real Time Informational Content of Macroeconomic Data Releases," CEPR Discussion Papers 5178, C.E.P.R. Discussion Papers.
  18. De Mol, Christine & Giannone, Domenico & Reichlin, Lucrezia, 2008. "Forecasting using a large number of predictors: Is Bayesian shrinkage a valid alternative to principal components?," Journal of Econometrics, Elsevier, vol. 146(2), pages 318-328, October.
  19. Marco Del Negro & Frank Schorfheide, 2002. "Priors from general equilibrium models for VARs," Working Paper 2002-14, Federal Reserve Bank of Atlanta.
  20. Christiano, Lawrence J & Eichenbaum, Martin & Evans, Charles, 1996. "The Effects of Monetary Policy Shocks: Evidence from the Flow of Funds," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 16-34, February.
  21. Ben S. Bernanke & Jean Boivin & Piotr Eliasz, 2004. "Measuring the Effects of Monetary Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach," NBER Working Papers 10220, National Bureau of Economic Research, Inc.
  22. Stock J.H. & Watson M.W., 2002. "Forecasting Using Principal Components From a Large Number of Predictors," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 1167-1179, December.
  23. Forni, Mario & Lippi, Marco & Reichlin, Lucrezia, 2003. "Opening the Black Box: Structural Factor Models versus Structural VARs," CEPR Discussion Papers 4133, C.E.P.R. Discussion Papers.
  24. Stephane Dees & Filippo di Mauro & M. Hashem Pesaran & L. Vanessa Smith, 2006. "Exploring the International Linkages of the Euro Area: a Global VAR Analysis," Computing in Economics and Finance 2006 47, Society for Computational Economics.
  25. James H. Stock & Mark W. Watson, 2005. "Implications of Dynamic Factor Models for VAR Analysis," NBER Working Papers 11467, National Bureau of Economic Research, Inc.
  26. Boivin, Jean & Ng, Serena, 2005. "Understanding and Comparing Factor-Based Forecasts," MPRA Paper 836, University Library of Munich, Germany.
  27. Mario Forni & Domenico Giannone & Marco Lippi & Lucrezia Reichlin, 2007. "Opening the Black Box: Structural Factor Models with Large Cross-Sections," Center for Economic Research (RECent) 008, University of Modena and Reggio E., Dept. of Economics.
  28. Marcellino, Massimiliano & Stock, James H. & Watson, Mark W., 2003. "Macroeconomic forecasting in the Euro area: Country specific versus area-wide information," European Economic Review, Elsevier, vol. 47(1), pages 1-18, February.
  29. David B. Gordon & Eric M. Leeper, 1992. "The dynamic impacts of monetary policy: an exercise in tentative identification," Working Paper 92-13, Federal Reserve Bank of Atlanta.
  30. Kim, Soyoung, 2001. "International transmission of U.S. monetary policy shocks: Evidence from VAR's," Journal of Monetary Economics, Elsevier, vol. 48(2), pages 339-372, October.
  31. Forni, Mario & Hallin, Marc & Lippi, Marco & Reichlin, Lucrezia, 2002. "Do Financial Variables Help Forecasting Inflation and Real Activity in the Euro Area?," CEPR Discussion Papers 3146, C.E.P.R. Discussion Papers.
  32. Mario Forni & Marc Hallin & Lucrezia Reichlin & Marco Lippi, 2000. "The generalised dynamic factor model: identification and estimation," ULB Institutional Repository 2013/10143, ULB -- Universite Libre de Bruxelles.
  33. Bartosz Mackowiak, 2005. "What does the Bank of Japan do to East Asia?," SFB 649 Discussion Papers SFB649DP2005-059, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  34. Christopher A. Sims & Tao Zha, 1996. "Bayesian methods for dynamic multivariate models," Working Paper 96-13, Federal Reserve Bank of Atlanta.
  35. Bernanke, Ben S. & Boivin, Jean, 2003. "Monetary policy in a data-rich environment," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 525-546, April.
  36. Litterman, Robert B, 1986. "A Statistical Approach to Economic Forecasting," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(1), pages 1-4, January.
  37. Harald Uhlig, 2004. "What moves GNP?," Econometric Society 2004 North American Winter Meetings 636, Econometric Society.
  38. Eichenbaum, Martin & Evans, Charles L, 1995. "Some Empirical Evidence on the Effects of Shocks to Monetary Policy on Exchange Rates," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 975-1009, November.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is featured on the following reading lists or Wikipedia pages:

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eca:wpaper:2008_033. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benoit Pauwels).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.