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Large Bayesian SVARs with linear restrictions

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  • Hou, Chenghan

Abstract

This paper develops a Markov Chain Monte Carlo (MCMC) algorithm for Bayesian inference in large structural vector autoregressions (SVARs) with linear restrictions. Our proposed method is based on a novel parameter transformation scheme, which aims to facilitate sampling from the posterior distribution of model parameters when linear equality and inequality restrictions are imposed on contemporaneous impulse responses. A prominent feature of the proposed methodology is its applicability for inference in SVARs with over-identifying restrictions. In our empirical application, we demonstrate the usefulness of our method by employing a large Proxy-SVAR with multiple proxy variables to simultaneously identify multiple macroeconomic shocks and investigate their contributions to the 2007–09 Recession.

Suggested Citation

  • Hou, Chenghan, 2024. "Large Bayesian SVARs with linear restrictions," Journal of Econometrics, Elsevier, vol. 244(1).
    • Handle: RePEc:eee:econom:v:244:y:2024:i:1:s0304407624001957
    DOI: 10.1016/j.jeconom.2024.105850
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    Cited by:

    1. Jan Pruser, 2024. "A large non-Gaussian structural VAR with application to Monetary Policy," Papers 2412.17598, arXiv.org.
    2. Lukas Berend & Jan Pruser, 2024. "The Transmission of Monetary Policy via Common Cycles in the Euro Area," Papers 2410.05741, arXiv.org, revised Nov 2024.

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    More about this item

    Keywords

    Large vector autoregression; Equality and inequality restrictions; Over-identifying restrictions; Proxy-SVAR;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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