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Estimating Multicountry Var Models

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  • Fabio Canova
  • Matteo Ciccarelli

Abstract

This article presents a method to estimate the coefficients, to test specification hypotheses, and to conduct policy exercises in multicountry Vector Autoregressive (VAR) models with cross-unit interdependencies, unit-specific dynamics, and time variations in the coefficients. The framework of analysis is Bayesian: A prior flexibly reduces the dimensionality of the model and puts structure on the time variations, Markov chain Monte Carlo (MCMC) methods are used to obtain posterior distributions, and marginal likelihoods to check the fit of various specifications. Impulse responses and conditional forecasts are obtained with the output of an MCMC routine. The transmission of certain shocks across countries is analyzed. Copyright © (2009) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Fabio Canova & Matteo Ciccarelli, 2009. "Estimating Multicountry Var Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(3), pages 929-959, August.
    • Handle: RePEc:ier:iecrev:v:50:y:2009:i:3:p:929-959
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    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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