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Endogenous Time Variation in Vector Autoregressions

Author

Listed:
  • Danilo Leiva-Leon

    (European Central Bank)

  • Luis Uzeda

    (Bank of Canada)

Abstract

We introduce a new class of time-varying parameter vector autoregressions (TVP-VARs) where the identified structural innovations are allowed to influence the dynamics of the coefficients in these models. An estimation algorithm and a parameterization conducive to model comparison are also provided. We apply our framework to the U.S. economy. Scenario analysis suggests that once accounting for the influence of structural shocks on the autoregressive coefficients, the effects of monetary policy on economic activity are larger and more persistent than in an otherwise standard TVP-VAR. Our results also indicate that cost-push shocks play a prominent role in understanding historical changes in inflation-gap persistence.

Suggested Citation

  • Danilo Leiva-Leon & Luis Uzeda, 2023. "Endogenous Time Variation in Vector Autoregressions," The Review of Economics and Statistics, MIT Press, vol. 105(1), pages 125-142, January.
    • Handle: RePEc:tpr:restat:v:105:y:2023:i:1:p:125-142
    DOI: 10.1162/rest_a_01038
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    References listed on IDEAS

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    4. Christiane Baumeister & Gert Peersman, 2013. "Time-Varying Effects of Oil Supply Shocks on the US Economy," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(4), pages 1-28, October.
    5. Giorgio E. Primiceri, 2005. "Time Varying Structural Vector Autoregressions and Monetary Policy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(3), pages 821-852.
    6. Marco Del Negro & Giorgio E. Primiceri, 2015. "Time Varying Structural Vector Autoregressions and Monetary Policy: A Corrigendum," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(4), pages 1342-1345.
    7. Timothy Cogley & Giorgio E. Primiceri & Thomas J. Sargent, 2010. "Inflation-Gap Persistence in the US," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 43-69, January.
    8. Koop, Gary & Potter, Simon M., 2011. "Time varying VARs with inequality restrictions," Journal of Economic Dynamics and Control, Elsevier, vol. 35(7), pages 1126-1138, July.
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    Cited by:

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    2. Xin Sheng & Rangan Gupta & Oguzhan Cepni, 2023. "Time-Varying Effects of Extreme Weather Shocks on Output Growth of the United States," Working Papers 202324, University of Pretoria, Department of Economics.

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    More about this item

    JEL classification:

    • 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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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