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Gibbs Samplers for VARMA and Its Extensions

Listed author(s):
  • Joshua C.C. Chan
  • Eric Eisenstat

    ()

Empirical work in macroeconometrics has mostly restricted to using VARs, even though there are strong theoretical reasons to consider general VARMAs. This is perhaps because estimation of VARMAs is perceived to be challenging. In this article, we develop a Gibbs sampler for the basic VARMA, and demonstrate how it can be extended to models with stochastic volatility and time-varying parameters. We illustrate the methodology through a macroeconomic forecasting exercise. We show that VARMAs produce better density forecasts than VARs, particularly for short forecast horizons.

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File URL: https://www.cbe.anu.edu.au/researchpapers/econ/wp604.pdf
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Paper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2013-604.

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Length: 22 Pages
Date of creation: Feb 2013
Handle: RePEc:acb:cbeeco:2013-604
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