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Gibbs Samplers for VARMA and Its Extensions

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  • Joshua C.C. Chan
  • Eric Eisenstat

Abstract

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.

Suggested Citation

  • Joshua C.C. Chan & Eric Eisenstat, 2013. "Gibbs Samplers for VARMA and Its Extensions," ANU Working Papers in Economics and Econometrics 2013-604, Australian National University, College of Business and Economics, School of Economics.
    • Handle: RePEc:acb:cbeeco:2013-604
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    File URL: https://www.cbe.anu.edu.au/researchpapers/econ/wp604.pdf
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    References listed on IDEAS

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    Cited by:

    1. Tsionas, Mike G. & Izzeldin, Marwan & Trapani, Lorenzo, 2022. "Estimation of large dimensional time varying VARs using copulas," European Economic Review, Elsevier, vol. 141(C).
    2. Mike Tsionas & Marwan Izzeldin & Lorenzo Trapani, 2019. "Bayesian estimation of large dimensional time varying VARs using copulas," Papers 1912.12527, arXiv.org.

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    More about this item

    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
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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