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Uncertainty Through the Lenses of A Mixed-Frequency Bayesian Panel Markov Switching Model

Author

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  • Marcellino, Massimiliano
  • Foroni, Claudia
  • Casarin, Roberto
  • Ravazzolo, Francesco

Abstract

We propose a Bayesian panel model for mixed frequency data, where parameters can change over time according to a Markov process. Our model allows for both structural instability and random effects. To estimate the model, we develop a Markov Chain Monte Carlo algorithm for sampling from the joint posterior distribution of the model parameters, and we test its properties in simulation experiments. We use the model to study the effects of macroeconomic uncertainty and ï¬ nancial uncertainty on a set of variables in a multi-country context including the US, several European countries and Japan. We ï¬ nd that for most of the variables ï¬ nancial uncertainty dominates macroeconomic uncertainty. Furthermore, we show that the effects of uncertainty differ whether the economy is in a contraction regime or in an expansion regime.

Suggested Citation

  • Marcellino, Massimiliano & Foroni, Claudia & Casarin, Roberto & Ravazzolo, Francesco, 2017. "Uncertainty Through the Lenses of A Mixed-Frequency Bayesian Panel Markov Switching Model," CEPR Discussion Papers 12339, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12339
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    More about this item

    Keywords

    Dynamic panel model; Mixed-frequency; Markov switching; Bayesian inference; Mcmc;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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