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A structural Bayesian VAR for model-based fan charts

  • Par Osterholm

Inflation forecast uncertainty is of importance for a wide range of agents in the economy, central banks in particular. Ways to describe and account for this uncertainty in a consistent manner have received increasing attention of late, in part due to the growing number of inflation-targeting central banks. This article develops a large structural VAR for the Swedish economy and estimates it in a Bayesian framework. The methodology permits not only structural interpretation and analysis but offers a natural way to formalize forecast uncertainty, as the posterior predictive density from the model has the interpretation of a fan chart.

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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 40 (2008)
Issue (Month): 12 ()
Pages: 1557-1569

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Handle: RePEc:taf:applec:v:40:y:2008:i:12:p:1557-1569
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